| Bloomberg Evening Briefing Americas |
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| US factory activity contracted in March for the first time this year and prices accelerated sharply for a second month as the drumbeat of higher tariffs reverberated through the economy. The Institute for Supply Management's manufacturing index declined 1.3 points last month to 49, according to data released Tuesday. Readings below 50 indicate contraction and the figure was slightly weaker than the median projection in a Bloomberg survey of economists. At the same time, the group's price measure increased to the highest since June 2022. Over the past two months, the gauge has increased 14.5 points, the most over a comparable period in four years. With Donald Trump pledging more tariff turbulence Wednesday and the rest of the world primed to retaliate, options traders are betting Treasuries will extend their rally ahead of any details on the president's "reciprocal" tariff plans. Evidence that investors are girding for new tariffs is accumulating as the once churning US economy begins to stumble under the weight of Trump-driven uncertainty. Investors tend to buy Treasuries when they believe growth is going to slow and eventually force the Federal Reserve to ease monetary policy. A popular haven in turbulent times, US government bonds have also drawn buyers following weeks of tariff-fueled volatility in stocks and other assets. The preparation for more economic damage can be seen in everything from big options wagers on lower Treasury yields to expectations of deeper-than-expected cuts from the Fed reflected in interest rate-linked derivatives. Lopsided demand for call options—which are used to bet on higher Treasury prices—is another important indicator. The premium investors are paying for calls relative to put options stands at its highest level since August 2024. "There is a large group of people in the marketplace that are putting much more emphasis right now on a recession than an inflationary episode without a recession or at least a slowdown," said Thierry Wizman, global currencies and interest-rate strategist at Macquarie Group. —David E. Rovella | |
What You Need to Know Today | |
| Others are just saying jettison some American investments. The nation's rising potential for a recession has Pacific Investment Management touting the attractiveness of "stable sources of returns" in global bonds. The bond manager is warning that Trump's trade, cost-cutting and immigration policies stand to slow the world's biggest economy by more than previously expected, hurting the labor market and supporting its view for investors to tilt their portfolios toward safer assets. There's "a strong case to diversify away from highly priced US equities into a broader mix of global, high quality bonds," economist Tiffany Wilding and chief investment officer for global fixed income Andrew Balls wrote in a note. Markets "are in the early stages of a multiyear period in which fixed income can outperform equities while offering a more favorable risk-adjusted profile." | |
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| House Republicans urged US Treasury Secretary Scott Bessent to rescind a Biden administration measure that gave regulators a pathway for placing nonbank financial firms under greater oversight, claiming it did little to improve risk monitoring. The lawmakers' request to Bessent, a former hedge fund manager, in his capacity as chair of the Financial Stability Oversight Council seeks to curtail the panel's ability to designate hedge funds and investment companies as systemically important. That too-big-to-fail tag, which brings significant compliance costs, has mostly been applied to large Wall Street banks. It was created, you may remember, to avoid a repeat of Wall Street's near-destruction of the global financial system in 2008. | |
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| Meanwhile, Congressional Republicans are drafting a tax bill said to include an increase of the state and local tax deduction to as high as $25,000 for an individual. A sizable increase to the current $10,000 limit on SALT write-offs—imposed by the GOP eight years ago—would represent a major political victory for a crucial group of swing-district House Republicans representing the New York City area and southern California. But Democrats warn Senate Republicans are attempting a mathematical maneuver to ignore the multitrillion-dollar cost of the party's 2017 tax package that largely benefitted the rich and corporations (which they want to renew, by the way). The Democrats argue the tactic, which they call an "accounting gimmick," will throw away decades of Senate precedent and further bloat the country's monstrous deficit. It also would enable Republicans to push through more of Trump's priorities. | |
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| Izzy Englander's Millennium Management and Ken Griffin's Citadel lost money last quarter amid Trump's trade wars even as other hedge funds gained. Millennium's flagship fund slid 1.2% in March and 2% for the quarter, while Citadel's main hedge fund fell 0.5% last month, extending this year's decline to 0.85%. Balyasny Asset Management lost 1% in March, paring its gain for the year to 2.6%. Quant firm Renaissance Technologies and David Einhorn's Greenlight Capital also weathered the turmoil and ended the quarter with gains. | |
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| Princeton University said US government agencies have frozen several dozen research grants as Trump escalates his attack on American higher education. The "full rationale" for the suspension isn't clear, said Princeton President Chris Eisgruber, but he affirmed the school's intention to combat antisemitism, which the White House has argued is its reason for threatening the defunding of schools such as Columbia University and others. Since Columbia bent to the administration's will in an unprecedented deal, the crackdown has stirred widespread concern that Trump is inflicting long-term damage on student free speech and expression as well as research and innovation across US campuses. The Trump administration has simultaneously ordered the summary arrest and deportation of foreign students who have protested against the war in Gaza. | |
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What You'll Need to Know Tomorrow | |
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