Trade Talks Unlikely to Derail Risk: 3-Minute MLIV

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00:00My key question here is, has the market already priced in all of the positivity we could possibly

00:04get from this Trump-Sheen meeting on Thursday? I mean, I don't think we're quite there yet,

00:09and I think we're going to have a lot of ups and downs before we get there. Now,

00:12China and the U.S. are the global growth engine. So when we were talking about 100% tariff rates,

00:17that was very scary because it was very negative for U.S. growth. It was very negative for China

00:21growth, but it was very negative for global growth. And that's really the concern here.

00:26And for risk assets, that's why you see a sell-off when you get escalation,

00:29and you see a rally when you get de-escalation. Now, I don't think we've

00:33quite priced in a full kind of resolution of this trade, but I think we're certainly headed in the

00:38right direction. And the reason for that is that there's a reason they de-escalated back in the

00:42spring, right? It's the U.S.-China trading relationship is more equal than any other

00:46relationship the U.S. has. The U.S. is reliant on China for rare earths, whereas China is reliant

00:51on the U.S. for tech. And so there's a reason that they want to make a deal more so here than

00:55elsewhere. And I think for equities in particular, unless you get something growth negative out of

01:00these talks, then you can have that momentum trend upwards. Are we not worried about inflation

01:04anymore? We're not worried about how everything's going to get super expensive, you get tariff

01:09pass-through is going to go to consumers. What happened to that narrative? I mean, I'm still very

01:12worried about it, but I think more for the U.S. than elsewhere. So in the U.S., I think it's just

01:17delayed rather than removed entirely, and it's because we had that massive front-loading.

01:22You also have different inventory cycles for different products, and you don't know what

01:25products really were front-loaded and which weren't, or what kind of points you need to be

01:29importing different things. And so I think while it's less likely we get a very high peak, it means

01:34we stay above the Fed's target for longer. For these other countries, though, it's more

01:38disinflationary. So Europe, for example, that's where I'm thinking mostly, because you have a demand

01:44shock, but you also haven't imposed retaliatory tariffs. So you don't have that price level

01:48adjustment. Your weak demand means that there's certainly nothing feeding through the economy in

01:52a more menacing way. And for me, that means that you're likely to see a more dupish ECB into 2026,

01:59although it's highly unlikely we're going to get that shift at this week's meeting.

02:02Well, we also have the Fed meeting this week, the Bank of Japan, also the Bank of Canada.

02:06Where do you think those surprises can come from?

02:08Yeah, I mean, on the surprise list, ECB is the lowest. I think it'll be a relatively boring meeting,

02:13they said for a while that 2% is where they kind of want to stay. And so you need something

02:17downside surprise wise on inflation to change that. For the Fed, though, I think that's potentially

02:23more interesting, although last week's softer inflation print means that we're pretty sure

02:27we'll get a cut at this meeting. We haven't had a lot of data in the in-between.

02:31Balance sheet runoff, do you think that could be a surprise?

02:33I don't think it'll be like the market doesn't really care that much because it's something that's

02:37been well telegraphed ahead of time. The Bank of Japan definitely falls up there more so in terms of

02:43being interesting because they could signal that they're hiking in December. Although again,

02:47you're two months away from that, you know, there's not a need to signal that right now,

02:51and there's nothing priced for this meeting. So that leaves the Bank of Canada, which usually

02:54isn't top of the list, as potentially the most interesting. There's around 22 basis points

03:00priced right now. I think they likely will cut despite the fact they've got very sticky inflation

03:05because they're still dealing with those tariff issues. And that's really putting downside on

03:10their growth prospects. If they do cut at this meeting, that brings them to the bottom of their

03:14neutral range. And I think the question from here was, if trade negotiations are going so poorly

03:20between the U.S. and Canada, you can't close the door on more cuts. And so that could weigh on CAD.

03:24And so that I think it may be the difference between the UAS to the bottom of the UAS to the bottom of the

03:30contract that has beenwh緩ing here. And it also carries the I dopożuc examine. And so on there is a

03:39good night slot between some of the UAS przekifiklogo. And so on there is now coming into the

03:43λλά, I see it there. Won't be able to be the samezamings. The UAS3 and the UAS4 andpanel

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