“Gun on the wall”

Heavy defeats for US Republicans in New Jersey and Virginia and a shrunken winning margin in Tennessee have triggered a spate of Congressional retirements and talk that Donald Trump's second presidency is already a "lame duck". This has prompted market speculation that he could take another populist turn - adding pressure on the Federal Reserve and posting out stimulus cheques. Michael Redmond, Medley Advisors' US and Fed analyst is sceptical. "It just makes it really difficult to control the House when there's this level of unhappiness and it's such a thin margin already and you have some people who are looking for the exits," he says in this podcast. "So that probably means that Trump can't get through some of these ideas that he's talking about ... The Fed won't really need to be delivering more easing next year but, with all these elements politically and economically, the risks are definitely skewed to the downside for interest rates next year". In this edited version of their weekly meeting, Medley analysts discuss this, lessons from Trump whisperers from Brazil, China's coming economic planning conference and a second wave of Chinese disinflation for Europe. In order the speakers are Michael Redmond, Tim Jones, Pepijn Bergsen, Mario Lima, Brian Jackson and Fernando Posadas.   

Is this week's correction to the stock market's seven-month streak a pause or a first puncture of the "AI bubble"?Medley Advisors analysts held their weekly meeting just after the first jitters and rally following Nvidia's earnings report but before the aggresive intra-day sell-off on 20 November. They discussed the meaning and causes of the correction, the impact of AI on Federal Reserve policy thinking, and the latest developments in US trade policy.In this abridged and edited summary of the meeting, the speakers are (in order) Dan Schwartz, Michael Redmond, Pepijn Bergsen, Fernando Posadas and Brian Jackson. "I don't think the bubble talk is going away," said Dan Schwartz. "The nature of the media has changed so much that you're going to hear a lot more of these voices ... If you go back to the Nasdaq bubble, think about who were the biggest voices on tech - it was probably Maria Bartiromo and Ron Insana on CNBC and they were cheerleaders for the sector. Today, you have a million trolls on the internet saying 'I told you so' or being champions of the technology". 

Democratic landslides in US state and city elections this week raised the possibility that Republicans could lose control of Congress entirely in the 2026 midterms. At the same time, the Supreme Court began public deliberations on legal challenges to the use of IEEPA emergency powers to impose tariffs without Congressional authority.Now on the backfoot after successful Democratic campaigns against high prices, will President Donald Trump be forced to leave the Federal Reserve alone to apply mildly restrictive policy? Could tariffs be under threat? Will foreign governments cowed by nine months of US unilateralism, start to smell weakness?These questions were raised at the Medley Advisors weekly analysts' meeting. In this edited podcast of the meeting, the speakers, in order, are Fernando Posadas, Michael Redmond, Mario Lima, Brian Jackson, Tim Jones, Dan Schwartz and Pepijn Bergsen."This administration bases a huge amount of their foreign policy on the ability to put tariffs in place," says Brian Jackson. "They have plenty of other powersready to go if they lose IEEPA specifically".

With an imminent election in Argentina and a string of them looming in Chile, Colombia and Brazil, Medley Advisors’ Latin America analysts decided the time was ripe for a client roadshow in New York last week. Their arrival also coincided with an escalation of the US’s military build-up in the Caribbean—culminating in deployment of the Gerald Ford aircraft-carrier group—as part of a campaign to change the regime in Venezuela.   “This is like Anton Chekhov said: when you hang a gun on the wall in the first act of a play, it's because, at some point, it's going to be used,” said Ignacio Labaqui, Medley’s regional political analyst. The build-up is “aimed at trying to provoke a defection that leads to either an internal coup or [President Nicolás] Maduro and other top officials of the administration leaving Venezuela”. Aside from Venezuela, in this podcast, Labaqui and his colleagues Fernando Posadas and Mario Lima outline client priorities in Latin America and discuss opportunities in regional rates markets, the implications of Argentina’s midterm-election results, and Brazil’s shifting political sands and monetary-policy outlook. 

As budgetary standoffs bring down a fifth French cabinet before it even takes office and shut down the US federal government, Medley Advisors analysts met to ask why markets seem so sanguine."Markets say they care about fiscal sustainability, but I'm not sure they do," says markets specialist Dan Schwartz. "Alternatively, they're saying that, despite the slippage, it's not a problem ... If that were to change, it would probably change all at once and then you'll start to see a risk premium priced into assets around the world".Discussing France, the US and market sentiment, the speakers (in order) are Tim Jones, Pepijn Bergsen, Andrew Besuyen, Dan Schwartz and Michael Redmond.     

As they near the end of their easing cycles, the Antipodean central banks are being tested by contrasting data signals - a hot August inflation print in Australia and contracting second-quarter activity in New Zealand.Will these price signals end the Reserve Bank of Australia's rate cuts? By contrast, will economic weakness prompt the Reserve Bank of New Zealand to go for a 50-basis-point cut at its next meeting?"There’s scope for the RBA to ease in November but easing next year has started to look a little bit more unlikely," says Andrew Besuyen, Medley Advisors' RBA/RBNZ-watcher, in this podcast. "On the November meeting, I'd say one monthly inflation print doesn't make a meeting ... I think the big difference this time is that the labour market is still softening". 

In recent weeks, financial markets have been sending conflicting signals about the risk of inflation, recession, and the sustainability of debt. Japanese and British yields, especially, spiked but then abated in line with falling US rates. To pick through this head-scratcher, Dan Schwartz, head of macro at Energy Aspects, talked to Medley Advisors’ Andrew Besuyen and Pepijn Bergsen. "What I think is happening is: the market thinks the [Federal Reserve] is going to be appropriately dovish, cut rates, support economic growth in the US and stop us from falling into a recession,” says Schwartz. “So the lower yields you're getting here are supportive of activity in other financial markets and one of the reasons why markets trade so well … The shift in the Fed's path of least regret has moved from guarding against the flank of potentially higher inflation from passthrough from tariffs and potentially higher inflation expectations into making sure that we don't see further deterioration in labour markets”. 

US President Donald Trump hogs the daily headlines but financial markets had a rare week off as attention turned to the latest episode in France's long fiscal crisis.As François Bayrou prepares to become the fourth prime minister to fall in 20 months, investors are asking whether anyone can pass a budget with such a split national assembly, whether a new legislative election will follow and lead to a victory for Marine Le Pen's right-wing RN, and even whether President Emmanuel Macron may resign early.At their weekly meeting, Medley Advisors' analysts discussed these questions, the vulnerability of the Federal Reserve to political takeover, and the singling-out of Brazil and India for special trade-war punishment."My money at the moment would be on Macron quickly appointing another prime minister in the hope that this prime minister will be able to bang enough heads together to get another budget passed," says European policy analyst Tim Jones. "I'm sceptical that this is going to work because the parties that would potentially be open to these kinds of compromises in the last budget round, [their] incentives have withered between last year and now". In this edited and abridged recording of the meeting, the speakers are, in order: Tim Jones, Pepijn Bergsen, Michael Redmond, Mario Lima and Debalina Hazra.

By now, it was meant to be clear that tariffs were pushing up US inflation and depressing employment but, until the producer prices index for July was released this week, evidence had been mixed. There has been little sign of passthrough to consumer prices although payrolls growth in July and big downward revisions to the May and June estimates were bad enough to provoke President Donald Trump to fire the head of the Bureau of Labor Statistics and replace her with a yes-man.To discuss the policy implications of the PPI and politicised data, Medley Advisors brought together four of its analysts - two (Dan Schwartz and Michael Redmond) who rely on high-quality statistics to do their jobs and two (Brian Jackson and Ignacio Labaqui) with hands-on experience of inconvenient truths in China and Argentina."Once you start with this gross manipulation statistics, it's likely you will see this spreading to others," says Labaqui. In Argentina, “it started with CPI, but then moved to poverty and then to GDP and finally to foreign-trade statistics ... It was not only that the private sector started to just not pay attention to the official statistics but also the central bank … started using private-sector statistics. One second consequence is that you see a mushrooming of private consultants running their own statistics".In order, the speakers are Schwartz, Redmond , Jackson and Labaqui.

News that the US and Japan had agreed a trade deal a week ahead of deadline added 5% to Japanese equity prices while lifting 10-year rates to 17-year highs, and this was followed by reports of an impending US-EU settlement, which pushed up European stocks by 2% and German 10-year rates by close to 10 basis points.As the 1 August deals deadline approached, analysts at Medley Advisors (a division of Energy Aspects) held their weekly internal meeting to add market context to policy analysis. "We did get a sense of how much trade uncertainty has been holding back foreign markets in the reaction: double-digit gains in the Japanese auto sector but more broadly," said Dan Schwartz, head of macro markets at Energy Aspects. "So I think just getting certainty and also a number - even if it's a little higher than the 10% that the market had hoped for back in pre-April - it really opens the door to some risk being reestablished in these places. The futures volume was off the charts; it was double what normal volume was ... at a time of year when volumes tend to dwindle ... I think there's a lot of signal in that".In this edited version of the meeting, the speakers in order are Schwartz, Andrew Besuyen (macro markets), Tim Jones (Europe), and Michael Redmond (US).