US Politics – Inauguration Day
Today Trump will be inaugurated as the 47th president. He’ll be sworn in at 12pm ET, followed by an inaugural speech including policy initiatives such as closing the Mexican border, calling for deportations and pardoning 6th January insurrectionists. Further this week, the market is closely watching for any announcement of immediate tariffs on China, Mexico, Canada or even universal tariffs.
Scott Bessent already gave a glimpse into the US policy outlook in his congressional hearing last week. For tariffs, he left all options on the table while he highlighted the importance of extending tax cuts to avoid a growth downturn. Further, he warned against high deficits, supported Fed independence and discussed further sanctions against Russia.
US Economics – Slower CPI cools markets
US inflation surprised to the downside last Wednesday, relieving pressures from rates markets. Headline CPI YoY rose from 2.7% to 2.9%, in line with expectations, while core inflation undershot at 3.2%, down from 3.3% last month. Fed Governor Waller welcomed the weaker core print, and said the Fed can continue cutting rates in a CNBC interview. Soft data surveys instead showed a stronger outlook, as the NFIB small business survey and the Philadelphia Business Outlook surprised broadly to the upside. Fed pricing remains on the very light side with few cuts priced, but the outlook for Fed policy will heavily depend on Trump policy this year.
Middle East – Ceasefire in Gaza
Israel and Hamas agreed to a ceasefire last week, brokered by the US, Qatar and Egypt, to end the 15-month conflict in Gaza. The agreement includes the release of hostages held by Hamas in exchange for Palestinian prisoners, facilitates humanitarian aid to Gaza and outlines a phased withdrawal of Israeli troops from populated areas. While the deal relieves tension in the Middle East, oil prices are still up 10% YtD as the US imposed wide-ranging sanctions on the Russian oil sector, as one of the last moves of Biden.
Algebris Investments’ Global Credit Team
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