WTF is happening now?

A quick recap of what happened overnight.

> Trade war:  Trump decided that all foreign-made movies will be hit with a 100% tariff [link]. Might be a shot at Canada (Vancouver/Toronto), or might just be a culture war shot at the entertainment industry. Either way, it’s not clear at all how the tariff would be implemented, as movies are complex and rely on services rendered from around the globe.

> Currencies:  So the peso is now trading with a 55-handle relative to the US Dollar (P55.64/$1.00 as of this writing). I know that happened a day or two ago, but it’s still shocking to see and I haven’t heard anyone talking about it yet, so I just wanted to put that out there. Dennis Uy companies breathing a little easier today. All it took was the US to drive its own economy off a cliff.

> Dow:  The DJIA was up modestly today, with the biggest news that Sketchers will be delisting (going private) after being sold off to a private equity firm. 

> Gold:  Spot gold is up 2% as of this writing, and the common sentiment seems to be more flight-to-safety demand ahead of the Fed’s decision on Thursday.

> Bitcoin:  Bitcoin is heading in the opposite direction from gold. It’s not acting as the “safe haven” that the “BTC is new gold” crowd would like to see, but it’s not imploding either. It’s acting more like the general stock market.

MB bottom-line: I’m just “some guy”, but I don’t think the US Federal Reserve will cut rates this meeting. Especially not as California and the western states brace for a 35% drop in goods this week, the predictable ripple that will have through the economy, and the unpredictable response all of that will generate with voters and the Trump administration. Paraphrasing what the Fed has already said, it will need to make a choice between suppressing inflation and protecting jobs, and my guess is that it will circle the wagons around suppressing inflation at the expense of employment; this (to me) says that the Fed will prefer to do nothing as the first waves of scarcity hit, to avoid being caught off-balance by tariff-induced inflation, scarcity-induced inflation, or any major changes that could come from the administration’s reaction to either. The Fed doesn’t meet to decide on rates for another month.

Merkado Barkada is a free daily newsletter on the PSE, investing and business in the Philippines. You can subscribe to the newsletter or follow on Twitter to receive the full daily updates.