Today is Day X — the announcement of inflation for March. Let's consider two scenarios:
1. Inflation has decreased — this would not mean anything to us, since the retaliatory tariffs are not reflected in the data for March, and we will see the inflation response in the data for April.
As we now know, Trump suspended tariffs for some countries, so a decrease in inflation and tariffs is an easy long squeeze and a rebound with consolidation, but further decline if inflation for April also decreases.
2. No changes — a slight increase and a decrease in volatility due to the realization of uncertainty and the expectation of rising inflation, since some tariffs are still in effect.
3. Increased — unlikely (0.1% - margin of error), but: a decline and growth, since if inflation rises, then the dollar, oil, stocks, and crypto rise.
What is most likely?
Inflation has decreased, reasons: expectation of increased oil production, the dollar is depreciating, unemployment is rising, budget and consumer spending is being cut.
When inflation falls — all markets, stocks, and crypto become cheaper. Therefore, the current rebound will not be a growth. Apparently, in the USA, they realized that there are enough measures to reduce inflation, and excessive tariffs will lead to a recession with a hard landing.
#MarketRebound #TariffsPause