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MARKETS

The U.S. stock market staged a comeback on Wednesday, clawing back some ground as Trump dialled down the tariff rhetoric—again.

Just 24 hours after a brutal selloff erased the last vestiges of the so-called "Trump Bump," markets have flipped back to the "Trump Put" trade. During President Trump’s terms in office, it was gospel that Trump would never let the stock market tank on his watch. Every policy move, no matter how aggressive, came with an implied safety net: push too far, markets panic, Trump backs down.

But here’s the kicker—those tariffs actually got slapped on. And that alone initally shattered the blind faith that Trump will always fold when Wall Street screams. .

The S&P 500 is clawing its way higher in the afternoon session, posting solid gains, but let’s be honest—it’s still a pitiful shadow of Europe’s monster rally. While Wall Street scrapes together a rebound, European markets are absolutely ripping, supercharged by Germany’s historic fiscal bazooka.

And here’s the thing—this divergence won’t be lost on Trump. Watching European stocks outshine the S&P 500 is the kind of optics that could push him toward an even bigger policy pivot. With trade war risks, weak jobs data, and global markets recalibrating in real time, don’t be surprised if the White House takes note of who’s actually winning in this market shake-up.

The contrast couldn’t be starker: Europe is riding an actual structural shift, while U.S. traders are stuck playing an unwinnable game of political roulette. The problem? Trading off Trump’s policy pivots is like playing 3D chess against an opponent who flips the board whenever he feels like it.

Markets are realizing that the only predictable thing about this trade war is its unpredictability—and that makes navigating it a trader’s nightmare.

For the macro maven, the actual storm brewing isn’t just tariffs—it’s the creeping growth scare that’s taken hold even before the economic impact of trade policy has fully set in. And last night’s tier-2 jobs data did little to calm the nerves.

Markets were already on edge about the trajectory of the U.S. economy, and Wednesday’s fresh read on the jobs market only added fuel to the fire. The ADP report was a dud—just 77,000 private-sector jobs were added in February, a sharp slowdown from January and well below economist expectations.

This isn’t an isolated miss—it’s part of a broader trend of weaker labor prints that are setting the stage for Friday’s all-important nonfarm payrolls (NFP) report. If NFP follows suit with a downside surprise, the narrative will shift from “tariffs are a headwind” to “the economy was already losing steam before the tariffs even landed.”

At this point, traders aren’t just watching the Fed for rate cuts—they’re watching for signs that the US economic exceptionalism trade might unravel in real time. And if Friday’s NFP disappoints, expect the market and, by extension, the Fed to hit the panic button on U.S. growth.

There’s some explosive chatter buzzing around Wall Street—is Trump actually engineering a recession to force the Fed’s hand? The idea isn’t as crazy as it sounds: a controlled growth slowdown triggers disinflation, which pressures the Fed into deep rate cuts, torpedoes the U.S. dollar, and sets the stage for the next chapter of Trump’s economic masterplan.

Treasury Secretary Scott Bessent has been dropping breadcrumbs, talking about a “rebalance” toward small businesses and consumers—code for a realignment that softens corporate muscle in favour of Main Street. Meanwhile, Trump stood in front of Congress on Tuesday night, casually brushing off the market turbulence from tariffs, signalling that he’s just fine with a little short-term pain.

If this theory holds, here’s the playbook: Let the Fed do the heavy lifting with rate cuts while Trump reloads supply-side stimulus with tax cuts and deregulation. And, of course, foreign direct investment and US corporate reshoring. The result? An economic reboot without the need for massive government spending.

But that’s enough tinfoil hat macro theorizing for one minute, back to reality.

FOREX MARKETS

The dollar crumbled to a three-month low as fears of a slowing U.S. economy snowballed, compounded by the looming drag from tariffs. But the real showstopper? The euro is staging a full-blown revival, ripping 1.3% higher to $1.0787—its highest in four months—and clocking its biggest three-day gain since August 2015.

The catalyst? Germany obliterated its fiscal playbook, announcing hundreds of billions of euros in defence and infrastructure spending, injecting optimism into European markets. Frankly, I’m surprised we’re not already closer to 1.09 this morning. While there is probably no good reason to fade the move( yet), I have taken some of the long EURO chips off the table at the New York Bell for prudent risk management protocol.

These 200-300 pip daily moves in FX? They come around maybe once a year—if that. Central bank narratives are so painstakingly choreographed these days that FX-implied volatility has been strangled for a decade. But when a monster signal like this lands, you don’t tiptoe in—you dive in headfirst.

For now, one thing is crystal clear—the almighty U.S. dollar’s safe-haven status has taken a massive hit. Call me a cynic, but I wouldn’t be surprised if this is all part of Trump’s playbook. Let’s be honest—his economic strategy hinges on boosting U.S. exports, and for that, he needs a weaker dollar.

Here’s the kicker—normally, when chaos erupts, the dollar acts like a black hole, sucking in capital from every corner of the globe. Even when the turmoil is self-inflicted, the greenback still benefits. Not this time. Instead of seeing the usual panic bid, we’re watching money leak out of the dollar.

And that raises a bigger question—has the market finally decided that erratic policymaking isn’t just a temporary risk, but a built-in feature of the U.S. economic landscape? Because if that’s the case, the days of the dollar’s untouchable status could be coming to an end.

THE VIEW

Investors have been begging Germany to loosen its fiscal straitjacket for years, arguing that its obsession with balanced budgets was stifling national growth. But now, with Friedrich Merz in power, it’s almost as if German banks and Berlin’s money managers had a crystal ball front running the markets. ( EU stocks were on a tear prior to the Fiscal Pump)

This fiscal pivot's sheer speed and scale suggest that some very well-connected hands were positioning ahead of time. Whether it was just sharp macro instincts or something a little more… orchestrated, the result is the same—Europe just pulled the most significant fiscal U-turn in decades, and markets are piling in.

The game has changed with Germany unlocking hundreds of billions of euros for defence and infrastructure spending. And for investors who’ve been waiting for Germany to throw austerity out the window finally, this is the moment they’ve been betting on.

The bond market is getting twitchy, and for good reason—Britain and France have had tense encounters with investors recently, as public debt nears or even exceeds GDP in both countries, putting them in the same club as Italy.

One possible solution? A grand European debt-sharing scheme—where Germany borrows while other nations handle the military muscle. Think of it as Berlin opening the fiscal floodgates to bankroll Europe’s rearmament, allowing countries like France to build nuclear deterrents or position troops near Russia—things that Germany itself can’t or won’t do.

Sounds neat in theory, but here’s the problem: the sheer mention of this idea makes policymakers break out in hives. The political landmines are everywhere—Germany embracing debt at scale, France and others taking on more military responsibility, and the broader EU navigating the optics of German-backed defense spending.

But time isn’t a luxury here—if Russia has any intention of pushing its territorial ambitions further, it has every incentive to move before Europe fully rearms. The question is, will European leaders recognize that and move fast enough, or will bureaucratic inertia keep the bloc lagging behind reality?

THOUGHT FOR THE DAY

Since estimating probability is a critical skill in trading, it’s essential to grasp one key truth: it’s far trickier to gauge extreme probabilities—both high and low—than those sitting comfortably in the middle. This isn’t just a numbers game; it’s an art form. And when it comes to framing those risks with precision, some have mastered the craft.

Markets love to price in the middle-of-the-road scenarios—but the real edge comes from knowing when the tails are fatter than they seem or when a seemingly low-probability event is actually creeping into play. That’s where real risk management—and real alpha—lives.

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