Midweek Macro Note: Fiscal Intervention Continues, FOMC Recap, First Trade Deal, Stalling Summer

In this Midweek Macro Note - we explore the implications of the first trade deal with the United Kingdom tomorrow, the FOMC and Fed decision today, continued fiscal intervention, & more

FOMC Recap, Stalling Summer, First Trade Deal (@DonMiami3, MacroEdge Chief Economist)

Good Wednesday evening MacroEdge Readers and Community, 

This evening we’ve gotten a leak from the NYT about a likely trade deal announcement with the United Kingdom tomorrow after Trump hinted at it after market close. This again sent markets back to the upper end of the range (highlighted below) that markets have found themselves in for the last week. Bitcoin also advanced on the move. The Trump Admin has shifted to after hours news drops for more impact in the less liquid futures markets - as well as timing headline releases with other important events - like today with Trump dropping an announcement on top of a rather negative FOMC meeting from Jerome Powell. The trade deal announcements are sort of drowning out sentiment and comments from the Fed - and this is likely a strategic move from Trump who is not getting what he wants in terms of rate cuts. 

Today the FOMC left rates unchanged, as expected, noting the rising economic risk from tariffs and other related shocks. Powell also noted that inflation and unemployment have not moved enough to spur any sort of immediate Fed reaction, which again risks the Fed being late into the summer. Odds of a rate cut for June are just under 25%, and the first cut is priced for July - with a higher degree of certainty. The odds of a June cut are growing in our outlook - especially if employment and economic data continue to weaken - alongside slowing inflation. The Fed will quickly lose the argument for holding rates at this level in that combination - even though the immediate reaction to rate cuts might be equity upside. In the last week - we’ve shifted back into a price range in the equity markets and it’s going to take more than an announcement of a trade deal with a trade partner as small as the UK to take markets above their May 2nd intermediate high of the rally. The rally itself has now sustained for over a month, from April 4th to present, or about a month. Our outlook remains the same as it has thus far, barring any change to earnings trends or the macro outlook, for a dip coming soon, rebound through June to these intermediate highs, followed by further downside materalizing in July after the actual tariff impacts begin to bite. That timeline could be accelerated, or outlook shifted, pending further trade deals, or a full walkback of tariffs - all of which remain in the range of the possibilities at the given time. The Trump fiscal put is on the gas full throttle at all times now - with Bessent speaking or on the air every day throughout the day to provide fresh headlines and a sense of ‘confidence’ for markets. In the end on the tariff front - expect some watered-down versions and agreements for most nations - and China to remain the holdout for the time being - barring any major surprise like that being the announcement tomorrow (highly doubtful based on the leak provided by NYT). 

This evening, we’ll review the important macro data for the rest of of the week, first trade deal arriving tomorrow, short term technicals, FOMC, and note final comments.

Let’s dive in. 

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Important Macro Data for the Rest of the Week 

The remainder of the week is fairly quiet on the macro data front - with just a few earnings reports to happen before and after market close tomorrow. We also get claims data (layoffs) and productivity data tomorrow + the press conference announcing the trade deal with what is likely to be the United Kingdom, based on leaks out of the administration. 

First Trade Deal 

Details about the first trade deal tomorrow are to be released at the 10 am press conference hosted by Trump - and internally it’s leaked that this is with the United Kingdom. Regardless, it hits the market with more positive ‘news’ that it’s been seeking - even in the noise of a lot of fake headlines and the administration telling semi-truths at best about trade talks even occurring with China/not occurring etc - so more positive being priced in even in the context of a lot of noise.