Insights: Tariffs, what happens after rate cuts + #BlackHoleFriday
Good reads:
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·???????? Weekly Investment Strategy
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Best quote of the week:
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“You may have heard of Black Friday and Cyber Monday. There's another day you might want to know about: Giving Tuesday. The idea is pretty straightforward. On the Tuesday after Thanksgiving, shoppers take a break from their gift-buying and donate what they can to charity.” – Bill Gates
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Best soundbites of the week:
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Probably the most talked-about news of the week was President-Elect Trump’s plans to put new tariffs in place on the first day of his administration.
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For Canada and Mexico, he is planning on “a 25% tariff on ALL products coming into the United States” that will remain in effect until “such time as drugs, in particular fentanyl, and all illegal aliens stop this invasion of our country.”
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For China, he wants “an additional 10% tariff, above any additional tariffs, on all of their many products coming into the United States of America” until China stops the flow of fentanyl into the U.S.
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In terms of timing, Trump stated that he plans on signing executive orders on day one (January 20); however, it’s unclear exactly how the tariffs will roll out.
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In terms of why now and how this might be avoided, here is a great synopsis from my Raymond James analysts:
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Why now? The Monday night announcement falls into a typical Trump pattern, where he will make an announcement that is well-received by the market (i.e., the nomination of Scott Bessent as Treasury secretary) and then uses the goodwill to follow up with a separate announcement that is more aggressive than expected. We expect to see this playbook (well-documented in his first term) repeat itself in Trump 2.0, and the Monday announcements represents a break from a period where he has been unusually silent on policy proclamations. The next few weeks will be indicative as to whether this will be an isolated incident in an otherwise quiet timeframe through Inauguration Day, or whether that period has now officially ended.
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How could these tariffs be avoided? The late November announcement of the tariffs – almost two months before Trump is sworn into office – should be viewed as a play to bring Mexico, Canada, and China to the negotiating table fairly early on. This is an aggressive out of the gate maneuver that is likely intended to secure a direct negotiating position and to allow him to change course at any point that he sees fit. While Trump is the “Tariff Man” and will be willing to see through these proposals, we also see him as prepared and willing to back down in exchange for key policy concessions (e.g., on the flow of fentanyl, as stated in his posts, but also on other policy priorities – we provide more background on this in our tariff primer). The appointment of key economic and trade personnel will also be a key factor to watch here, and we expect to see voices within the administration (such as Treasury Secretary nominee Scott Bessent) calling for a more incremental/layered approach to the imposition of new tariffs – alongside those advocating for more aggressive, across-the board tactics. Depending on whose voice wins out, we could see Trump forge ahead with an eventual goal in line with his Monday night proposals but implemented in a more gradual manner.
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Best visuals of the week:
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Historically, falling rates have been very good for both stock and bond markets. That trend has clearly continued this time around. Here is a great chart from RBC Global Asset Management with the cumulative returns since the first rate cut in June of this year.
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领英推荐
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Beyond the markets:
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Today is Black Friday, which traditionally marks the beginning of the holiday shopping season. Here are some interesting facts about the day:
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·???????? The commonly accepted story is that the name “Black Friday” originated during the 1960s in Philadelphia. The Philadelphia Police Department (PD) used the term because large crowds of shoppers and tourists in town to watch the Army vs. Navy football game on the Saturday after Thanksgiving would fill the city streets—resulting in heavy traffic jams, and often an increase in shoplifting. All the PD’s officers were required to work that day, with many on duty for longer shifts to help control the chaos. The day was known as Black Friday, as the officers dreaded the stress.
·???????? Another often-repeated theory suggests that Black Friday is related to retail profits, with many businesses moving “into the black” by turning a profit for the year.
·???????? It is not usually the biggest shopping day. Most often it loses that title to the Monday after Black Friday – known as Cyber Monday – or Super Saturday, which is the last Saturday before Christmas.
·???????? Canada started promoting Black Friday sales in 2008, the UK joined in the fun in 2010, and Australia followed in 2013. Now, more than 100 countries have a form of Black Friday sale.
·???????? In 2023, 72% of Black Friday shoppers opted to shop online for convenience, free delivery, and easier price comparisons, a trend that is expected to continue in 2024.
·???????? Even NASA gets in on the Black Friday fun, posting images, podcasts, and other information about black holes in space. #BlackHoleFriday
·???????? In response to the consumerism of Black Friday, a movement has grown among activists to highlight why Black Friday is bad, designating it “Buy Nothing Day.” This encourages consumers to avoid making purchases to raise awareness of overconsumption.
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Source: Techopedia
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Thanks for reading, and I wish everyone a wonderful weekend!
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Cheers,
Kim
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Kim Inglis, BCom, CIM, PFP, FCSI, RIAC
Senior Portfolio Manager
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T: 416.777.6417 (Toronto)
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T: 250.979.1803 (Kelowna)
TF: 1.877.363.1024
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