With the yield on the 10-year Treasury bond skyrocketing from 3.9% last week to 4.4% today, the Trump Administration called for a 90 day pause on the extortionate tariffs announced last week. Going forward there will be a minimum tariff of 10%, except for China(125%), steel, aluminum, and automobiles. The tariffs announced last week are now a ceiling and 10% is now a floor. In response the S&P 500, as of this writing (2:43 EDT) soared 8%. I would remind readers that the best single days in the stock market occur in bear markets.
My guess is that the downturn will resume in a few days as investors realize the huge uncertainty associated with negotiating tariffs with 80 countries over the next 90 days will have a deleterious effect business and consumer investment. As a result my call for a recession starting this quarter still stands.( See: https://shulmaven.blogspot.com/2025/03/the-recession-of-2025.html ) My view is reinforced by the fact that the backup in interest rates will drive another stake in the already weak housing market. A 7% interest rate on a 30-year fixed rate mortgage is a killer.
Lastly something very negative is going on in the bond market. Whether it is trillion dollar basis trades going south or selling by international holders losing trust in the United States, the fact remains a 4.4% 10-year Treasury bond in a weak economy signals something is very wrong. (See: https://shulmaven.blogspot.com/2025/04/a-broken-stock-market-and-broken-trust.html)
In the early 2000’s the cost to my company in Long Island, NY was $130 hr. For a software engineer. Comparative cost for a better engineer in China and India was $12 hr to $17 hr. The cost of manufacturing an injection tool to make 100,000 parts was over $100,000 in the US vs $25,000 in Portugal. Employees that soldered chips to electronic cards used by our computers was $15+ per hr in the US compared to $1 per hr in Mexico. This did not include overhead for company owned facilities in the US to house employees vs. no cost for facilities overseas.
ReplyDeleteSo our jobs and technology was shipped overseas so that we could remain competitive in the world markets. If you wanted to compete you needed to manufacture globally or perish.
Now Trump says he will bring those jobs back? Thanks to AI and robotics the higher skill most technical jobs will disappear in the next decade as will millions of service jobs world wide. This is what we need to prepare for. Not bringing back jobs from developing countries like garment piecework or stuffing fillings into children’s plush toys.
The stock and bond markets understand 21st century global markets. The US President has his head in the 1960’s.