Low-Volume, Low-Volatility Sessions: What the Macro Backdrop Is Really Telling Us

1. Quiet Tape, Muted Catalysts

Both the pre-open Globex trade and the U.S. afternoon session have been registering historically low
realised volatility and volume. GDP (-0.5 % q/q chained) and May’s personal-income/spending
update failed to move the needle, underscoring that headline eco-data are not the driver right now.

2. Disinflation Continues—But Eyes Turn to Tariffs

• CPI trend: May CPI slowed to 2.4 % Y/Y; consensus for the 15 July release
  (covering June) points to another step-down, confirming a gentle disinflation path.
• New inflation risk: The Fed’s June Monetary Policy Report highlights prospective
  MAGA tariffs as a potential upside shock to prices, despite the current cooling trend.

2a. PCE: Expected Uptick—But Why the Market Shrugged

May core PCE rose 0.2 % m/m and 2.7 % Y/Y, exactly in line with market expectations,
so the release landed as a non-event for risk assets.

Because the surprise index was effectively zero, Fed-funds futures barely budged and
S&P e-mini volumes stayed in the bottom decile of the past year. What matters now is the
trajectory, not the print—particularly once tariff effects begin to filter through later in Q3.

Importantly, the real-income backdrop remains constructive: real average hourly earnings gained
1.4 % Y/Y and real weekly earnings 1.5 %, so inflation-adjusted purchasing power is
still expanding.

Tomorrow’s BEA release on real wage consumption is likely to confirm this trend, which explains today’s
market apathy toward the PCE data. Still, elevated liquidity parked in money-market funds
($7.02 trn AUM) and tariff uncertainty keep the system in a strong-but-afraid mode:
the cash is ready, conviction is not.

3. Funding-Side Friction: 13-Week Bills Say “No Cut Yet”

Secondary-market yields on 13-week T-bills hover at ≈ 4.30 %, well above the
4.00 % – 4.05 % zone that typically precedes a 25 bp Fed ease. In short, the bill
market is not pricing a Powell pivot.

4. Fiscal Reality Check

Tariff revenue, even under aggressive assumptions, cannot plug the widening gap left by softer
personal-income-tax receipts. Inflation created by higher import duties would erode any nominal
gain, compounding the real deficit burden. The metaphorical 300 km/h train lacks brakes in the near term.

5. Liquidity & Behavioural Shifts

• Money-market funds: Total AUM rose $7.6 bn in the eight days to 25 June, pushing the
  aggregate to $7.02 trn—a ~1 % m/m and 2.4 % Y/Y climb.
• Personal saving: Despite a dip in May’s saving rate to 4.5 %, the absolute level—
  $1.01 trn—remains a ready spending war-chest once macro-uncertainty fades.

6. Market Implications

1. Directionally long bias persists—but conviction is low. Thin liquidity means
   outsized gap risk once a genuine catalyst appears.
2. Event path dependency: A softer-than-expected June CPI could spark a relief rally,
   yet any concrete tariff-implementation timeline would likely erase that bid.
3. Watch the front end: A decisive break of the 13-week bill toward 4 % would be the
   clearest signal the Fed is comfortable opening the rate-cut door.

Bottom Line

The market remains caught between current disinflation and future tariff-driven inflation risks,
all under the shadow of a widening fiscal gap. Until one narrative dominates, expect more
quiet-tape / fast-tape alternations rather than a sustainable trend.

US GDP (Q1 2025 – 3^rd estimate): reading the numbers

The Bureau of Economic Analysis (BEA) revised real GDP for January-March down to an annualised -0.5 %, versus the prior –0.2 % second estimate, yet the level is still +1.99 % above the same quarter a year ago. Gross National Product (GNP) fell more sharply because cross-border income flows swung lower.

GDP vs GNP — why the difference matters

GDP is the value of all goods and services produced inside U.S. borders.

GNP adjusts GDP by adding income that U.S. residents earn abroad and subtracting income that foreigners earn in the U.S.:

GNP = GDP + (income receipts from rest of world) − (income payments to rest of world)

Because those receipts and payments mostly reflect profits, interest and dividends, GNP is often a clearer gauge of how much output-derived cash actually accrues to U.S. residents. When receipts fall faster than payments—as in Q1 2025—GNP can contract even if the trade balance looks steady.

Headline metrics

Where the weakness came from

• Consumer spending: contribution cut to +0.09 ppt, mainly recreation and transport services.
• Exports: –0.11 ppt drag, led by royalties & business services.
• Imports: front-loaded goods kept the import line elevated.
• Government: –0.16 ppt as both federal and state outlays eased.

Why GNP shrank faster than GDP

• Income receipts from the rest of the world: –$91.6 bn q/q.
• Income payments to the rest of the world: –$54.6 bn.
• Net effect: roughly –$37 bn on GNP.

Three signals about the global cycle

1. Advanced-manufacturing exporters are feeling the chill from weaker foreign demand.
2. Partner economies are slowing faster, shown by softer U.S. imports.
3. Despite the dip, the U.S. still posts near-2 % y/y real growth—rare among G-7 peers.

Market takeaways

Bottom line

Q1’s negative print signals a synchronised global slowdown more than a U.S. recession. Domestic momentum is still positive y/y, suggesting equity indices can grind higher on thin volumes while fundamentals stay sound.

Re-shoring Tariffs, Globalization & the Limits of U.S. Industrial Policy

1. Globalization: the “Monster” the West Created

To tell the full story, we could start at Bretton Woods: the U.S.-led security umbrella, containment of the Soviet Union, spread of global bases, the gold-exchange standard, the cost of Vietnam, the dawn of dollarisation, bond-market creation, and the unprecedented post-war boom that peaked globally—at least for the non-rogue world—in 2019.
Add the first U.S.–China trade war, COVID-era supply-chain shocks, Russia’s invasion of Ukraine, dollar-weaponisation backfires, Europe’s power-price spiral under sanctions, and today’s reciprocal “MAGA-tariff” economics, and you have a sweeping political journey from the fall of one empire to the rise of others.

For brevity, let’s fast-forward to 2000 and examine corporate-driven globalism—the relentless search for profit, a one-way journey not easily reversed by policy alone.

Since 2000 Western multinationals have chased ever-lower production costs by offshoring to emerging economies that sweeten the deal with:

• Cheaper labour (often magnified by deliberate currency depreciation).
• Light-touch corporate tax—typically 0–17 %, versus ≈30 % in the U.S. and ≈50 % in much of Europe.
• Tax holidays on reinvested profits.

The result is a web of supply chains where production occurs abroad while profits accumulate in low-tax jurisdictions, hollowing out mid- and low-value U.S. manufacturing.

2. Trump-Era Tariff Logic

The Trump strategy tries to offset revenue lost to individual tax cuts with extra tariff receipts and to nudge production back onshore. In practice, the U.S. faces two powerful counter-forces:

3. Domestic Constraints on “Made in America”

1. Industrial mix
   Industrial Production Index (base 2000 = 100, nominal dollars):
   • Overall: 103.8 (+0.15 % CAGR)
   • Durables: 124.3 (+0.91 % CAGR)
   • Non-durables: 93.2 (–0.27 % CAGR)

   The U.S. now specialises in high-value, high-margin goods (≈16–18 % profit after tax). Lower-margin segments left long ago.

2. Labour market
   • 69.6 % of the labour force holds some college or a bachelor’s degree+ (up from 58 % in 2000).
   • Unemployment hovers at 4 %. Skilled workers are expensive and scarce—ill-suited to low-value assembly.
3. Exchange-rate drift (Jan 2008 → Jun 2025)

4. What the U.S. Imports — and From Where

2015 → 2024 Census/BEA data

Fastest-growing import lines (CAGR):

1. Finished metal shapes 12.4 %
2. Nuclear fuel 10.3 %
3. Pharmaceuticals 9.6 %
4. Bakery goods 9.5 %
5. Electric apparatus 8.6 %

Highest-value categories (share of 2024 import bill):

5. Realistic Re-shoring Targets

6. AEI’s Profit-Repatriation Proposal

Treat foreign-made goods of U.S. firms as if produced at home.

1. Import at cost (e.g., iPhone lands at $100, not $120).
2. U.S. entity marks up to retail ($120) and pays U.S. tax on the $20 profit.
3. Production stays abroad, but the tax base shifts homeward.

Feasible—yet politically delicate and administratively complex. Implementation would be incremental and face WTO scrutiny.

7. Revenue Reality Check

Early White-House talk of $200–300 bn in extra tariff revenue is implausible. Even aggressive levies can:

• Modestly trim the trade gap (offset by higher consumer prices).
• Slightly lift corporate-tax collections via on-shored margin or AEI-style adjustments.

They cannot fully backfill the revenue lost to sweeping income-tax cuts.

8. Takeaways

• Tariffs can tilt specific industries but cannot reverse two decades of off-shoring economics.
• Durable gains hinge on industrial strategy—subsidies, skills, energy costs—more than on blunt tariff weapons.
• The AEI approach—taxing profits where the consumer resides—could claw back revenue without forcing impossible cost realities onto U.S. factories.
• Expect incremental wins (autos, selected generics) rather than a rapid, across-the-board manufacturing renaissance.

Bottom line: Tariffs alone are a scalpel, not a sledgehammer. They can score tactical victories, but restoring broad-based industrial capacity demands a wider policy toolkit—tax reform, workforce development, and strategic sector incentives—balanced against global supply-chain realities.

The American system has always self-regulated; the real lever is monetary. Operate through the Federal Reserve to curb some of the dollar’s overvaluation and claw back part of other currencies’ devaluation—a tall order, but crucial, given that U.S. capital markets remain the world’s most attractive for both stocks and bonds. Still, higher rates are required to keep bond auctions clearing—a vicious circle.

Regulating trade by country misses the mark. Policy should target specific sectors within countries, coupled with incentives to re-shore a manageable slice of imports—cars and pharma are viable; others are not. At best, tariff parity may nudge exports higher. Multinational lobbies will still wield outsized influence; professionals are needed at the helm.

America has massive expertise and brain power waiting to provide solutions, and this is largely ignored or censored out by the media or agencies or is not part of the political agenda and team, but the solutions are there, if the eminent sources of intelligence are tapped-  in time, they maybe and the market waits for clarity.

For us as traders, understanding the global context of the system and market,  the systemic levers—why markets oscillate between risk-on and risk-off—is vital, regardless of the daily spectacle in Washington, left or right- it’s irrelevant; Rates the current hurdle, sticky inflation, and chaotic policy makers – certainty and uncertainty are the 2 drivers of the market phase.