January fifth, twenty twenty-five (241230-250105)
Trump policy trades: the most likely baseline path or less
Before inauguration, a few things are unfolding around the Trump policy trade:
First trade: debt and government reform
On 1 3, Johnson was re-elected Speaker of the House, but with 219-215 votes
“In the first roll-call vote, which lasted nearly two hours, Johnson appeared unable to secure the majority needed to keep his position. However, after extensive negotiations, two Republican opponents changed their votes, switching to support him.At least one of them reportedly received a call from Trump himself. Johnson ultimately won re-election by the narrowest required margin of 218 votes”
The first roll call (before two members changed their votes) was 217-217.
After the vote, Johnson vowed to extend Trump’s 2017-year tax cuts, which expire this year, and reduce regulation. He said: “We will dramatically reduce the size and scope of government.”。”
Second trade: immigration and industrial policy
Immigration discussions have been gaining momentum around H-1B visas in recent days; H-1B mainly concerns the U.S. technology sector.
Compared with domestic employees, H-1B employees are easier to exploit, cheaper, and more convenient, but this issue continues to face opposition among traditional Republicans and Trump’s long-standing base.
Third trade: tariffs and U.S. manufacturing
U.S. manufacturing PMI for 12 rose to its highest level in 9 months. The forward-looking new orders component continued to rise from 50.4 in 11 (the first reading indicating expansion since 3) to 52.4, while the manufacturing prices-paid index also rose from 50.3 in 11 to 52.5.
This PMI, driven by forward orders and input-price indices, reflects production brought forward amid uncertainty about the trade environment, and does not indicate a long-term inflation trend or a fundamental improvement in U.S. domestic industry.
Meanwhile, the manufacturing employment index, which truly reflects employment at domestic factories, remains in contraction, falling from 48.1 in 11 to 45.3. This represents the normal trend in the U.S. economy and remains fundamentally disinflationary; at least for now, the reflationary argument has no real support.
By contrast, what matters more is that the manufacturers’ factory inventory index continued to rise in the 12 data, The increase in the inventory index stems from the early delivery of many overseas materials in preparation for the potential impact of future tariffs.
Early production and stockpiling in industry will boost prices and output in the short term, but if Trump’s tariff trade does not go that far (internal divisions remain substantial, and failing to achieve the baseline path is the most likely outcome),then this component will shift from a reflationary factor to a deflationary one.
We continue to hold the view that the Fed will ease more than the market expects this year.
The weekend is over. Wishing everyone reading this a happy life and a smooth week ahead!
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Note: Everything in this article is for reference only and does not constitute investment advice or serve as the basis for any laws, regulations, or regulatory policies. Investors should not use or rely on this information as a basis for decision-making.