Investors are unexpectedly selling U.S. government bonds, a phenomenon worrying experts due to the potential for rising interest rates on loans and decreased confidence in the U.S. as a stable investment. This sell-off contrasts with typical behavior during economic uncertainty, where investors traditionally flock to Treasuries. Contributing factors include concerns about President Trump’s policies and the potential unwinding of leveraged trades. The situation is further complicated by the lack of a clear, single cause and the uncertainty surrounding its duration and ultimate impact.
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Investor concerns over Donald Trump’s tariffs triggered a sell-off of US government debt, sharply increasing interest rates on US bonds from 3.9% to 4.5%. This undermines the traditional “safe haven” status of US bonds, increasing borrowing costs for both companies and the government. The escalating trade war between the US and China, coupled with fears of higher inflation and reduced economic growth, fueled the sell-off, leading to predictions of a potential US recession. The Federal Reserve may be forced to intervene to stabilize the bond market, while the global economic impact, particularly on the UK, is already being felt.
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In response to President Trump’s unexpected tariffs, Federal Reserve Chair Jerome Powell voiced concern over the potential for increased inflation and reduced economic growth. Powell emphasized the Fed’s commitment to maintaining stable inflation and stated that the central bank will adopt a wait-and-see approach regarding interest rate adjustments until the full economic impact of the tariffs becomes clear. He noted that the tariffs’ effects are uncertain but are likely to be significant, causing both higher inflation and slower growth. This cautious stance follows recent market volatility and President Trump’s call for interest rate cuts.
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Goldman Sachs’ recent upward revision of the US recession probability to 35%, from a previous estimate of 20%, is a significant development that deserves careful consideration. This increase reflects a growing concern among economists about the trajectory of the US economy. The jump alone suggests a rapidly evolving situation, prompting a reassessment of economic forecasts.
The increased probability underscores the accumulating economic headwinds. These include factors such as persistent inflation, rising interest rates, and a weakening consumer confidence. The current economic climate is reminiscent of past periods that preceded significant economic downturns, raising anxieties among investors and the public.
Many observers believe that the 35% figure itself may be an underestimation of the actual risk.… Continue reading
January’s Consumer Price Index (CPI) rose 0.5 percent, exceeding forecasts and marking a faster increase than December. Core inflation, excluding volatile food and energy prices, also surpassed expectations at 0.4 percent. This higher-than-anticipated inflation adds pressure on President Trump’s administration to fulfill its campaign promise of immediate price reduction. The Federal Reserve’s next move on interest rates will likely be informed by this data, with Chair Powell suggesting a wait-and-see approach given the uncertainty surrounding the new administration’s economic policies.
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January’s Consumer Price Index (CPI) report revealed a 3% year-over-year increase in inflation, exceeding expectations and marking a rise from the previous month’s 2.9%. This surge, driven by increased costs for groceries, gasoline, and rent, is likely to solidify the Federal Reserve’s stance against further interest rate cuts. The unexpected inflation increase follows President Trump’s election promises to reduce prices and could dampen business optimism, as evidenced by the Dow’s decline and rising bond yields. Economists express concern that this inflation, coupled with Trump’s proposed tariffs, could negatively impact business confidence and economic growth.
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January’s Consumer Price Index (CPI) data revealed a 0.5% increase in consumer prices from December, marking the fastest pace since September 2023 and an annual inflation rate of 3%. This unexpectedly high figure, exceeding economist predictions, reflects broad price increases across various goods and services, including a significant 15.2% jump in egg prices. Even the core CPI, excluding volatile food and energy, rose 0.4% monthly, reaching an annual rate of 3.3%. This surge in inflation counters the Federal Reserve’s goals and could lead to continued high interest rates, contrasting with President Trump’s desired policy adjustments.
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President Trump publicly urged immediate interest rate reductions globally, marking a renewed confrontation with the Federal Reserve. His comments, delivered at the World Economic Forum, followed his past criticisms of Fed Chair Jerome Powell and his assertion of influence over monetary policy. While the stock market reacted positively, the Fed has consistently maintained its independence from political pressure. Trump intends to communicate directly with Powell, despite lacking direct statutory control over the central bank.
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In short, the CFPB alleges Capital One misled consumers regarding its savings accounts, resulting in over $2 billion in lost interest. The suit centers on the bank’s alleged deceptive marketing of its “360 Savings” account, which offered significantly lower interest rates than its “360 Performance Savings” account, while employing tactics to obscure the superior option from customers. Capital One denies these allegations and asserts its marketing was transparent. The lawsuit precedes a change in administration, prompting a strong denial from Capital One.
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December’s jobs report revealed a robust 256,000 job increase and a decrease in unemployment, defying expectations and bolstering President Biden’s claims of a strong economy. This unexpected surge in growth, occurring despite high interest rates, lessens the likelihood of further rate cuts by the Federal Reserve, potentially impacting consumers and businesses. While the economy shows strength with low unemployment and GDP growth exceeding 3 percent in four of the last five quarters, inflation remains above the Fed’s target, and high interest rates persist. Consequently, President Biden leaves office handing a generally strong, albeit complex, economic legacy to his successor.
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John Q. Hosedrinker 
Matt Underwood