The following audio episode provides an in depth discussion of this weeks news from "The Edge".
The Weekly Edge – Up to 11th February 2025
Brought to you by Gilt Investments
The Week That Was: Tariffs, Treasuries, and Trump Tweets
Welcome back to The Weekly Edge, your all-in-one recap of the biggest financial, economic, and political moves that shaped markets this past week. If you’ve been too busy checking your brokerage account, yelling at the bond market, or debating inflation over dinner, don’t worry—Gilt Investments has got you covered.
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At the end of each week, we consolidate these insights into The Weekly Edge—a comprehensive review highlighting key themes, market trends, and strategic considerations for investors.
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The Week That Was: Tariffs, Treasuries, and Trump Tweets
This week, financial markets took a ride on the wild side, with global events keeping investors on edge. We had tariff drama, central bank suspense, housing market twists, and even Elon Musk questioning the Federal Reserve’s transparency (because, you know, that’s not controversial at all).
Here’s what went down:
1. Trump’s Tariff Tsunami
President Trump isn’t just shaking hands—he’s shaking up global trade. He announced 25% tariffs on all steel and aluminum imports, including from Canada and Mexico, because apparently, reciprocity now means "everyone pays up."
Markets barely flinched, signaling either resilience or blissful ignorance. Meanwhile, China is probably dusting off its playbook for retaliatory measures.
2. Job Market Jitters
The U.S. added 143,000 jobs in January, missing expectations. The unemployment rate held at 4%, but money markets now believe the Fed won’t cut rates until July.
With inflation still lurking, Powell is in a tough spot:
✂ Cut rates too soon = inflation risk
⌛ Wait too long = economic slowdown risk
3. Bond Markets: The Inflation Monster Rises
Short-term inflation expectations surged, making the bond market nervous.
The five-year breakeven rate (inflation expectations baked into bond prices) hit 2.64%, outpacing long-term inflation expectations for the biggest gap in two years.
🔍 Translation: Traders see price pressures heating up.
4. Housing Market Highs and Lows
🏡 U.S. mortgage rates fell for the third straight week, now at 6.89%. Good news for homebuyers—just in time for them to realize houses are still ridiculously expensive.
🏠 In the UK, home prices hit a record high of £299,138, proving that economic uncertainty is no match for house price insanity.
5. Macquarie’s Mixed Results
Macquarie Group’s commodities trading arm struggled, but its asset management unit picked up the slack.
The firm’s profit stayed flat year-over-year, making for a mixed bag of results.
6. Deutsche Bank’s Oops Moment
Spain’s securities regulator slapped Deutsche Bank with a €10.3 million fine for selling derivatives to clients who later claimed they didn’t understand them.
If you’re thinking “Wait, didn’t we go through this in 2008?”—yes, yes we did
Gilt Recommendations: Navigating the Fixed Income Maze
With all this market turbulence, what’s an investor to do? Fear not—here’s where the fixed income market presents opportunities:
💡 Short-Term Bonds & Floating Rate Notes (FRNs):
With inflation expectations rising and the Fed holding steady, short-duration instruments help hedge against rate volatility. FRNs offer a compelling option as yields adjust with rising rates.
💡 Inflation-Protected Bonds (TIPS & ILBs):
If Trump’s tariffs and rising breakevens are any indication, inflation isn’t backing down.
📌 Inflation-linked bonds (ILBs) in Australia or TIPS in the U.S. can help shield against purchasing power erosion.
💡 Investment-Grade Corporate Bonds:
Given Macquarie’s resilience and stable earnings, high-quality corporates with strong balance sheets remain a solid play—especially in industries that can pass on costs.
💡 Australian Sovereign Bonds (Short Duration):
If rate cuts get delayed due to inflation concerns, short-duration Aussie government bonds offer yield without excessive risk
Final Thoughts: The Week Ahead
Markets are balancing between optimism and paranoia, with inflation, interest rates, and trade policies dictating direction.
As we step into next week, keep an eye on:
✔ U.S. CPI data – A key driver of Fed policy
✔ More Trump trade announcements – Because one tariff headline is never enough
✔ China’s economic signals – Deflation or rebound?
✔ Bond yields and equity volatility – The battle between risk and safety
Gilt Investments will be watching it all, keeping you informed with daily Edge updates.
Until next week, keep your duration short, your hedges tight, and your sense of humor intact!
— Brought to you by the team at Gilt Investments
Disclaimer
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