The first battle between bond vigilantes and King Trump has gone to the former.
Members of President-elect Donald Trump’s incoming economic team are discussing slowly ramping up tariffs month by month, a gradual approach aimed at boosting negotiating leverage while helping avoid a spike in inflation, according to people familiar with the matter.
One idea involves a schedule of graduated tariffs increasing by about 2% to 5% a month, and would rely on executive authorities under the International Emergency Economic Powers Act, the people said.
The proposal is in its early stages and has not yet been presented to Trump, the people said — a sign that a monthly stepped approach is early in the deliberation process.
Advisers working on the plan include Scott Bessent, the nominee for Treasury secretary, Kevin Hassett, set to be director of the National Economic Council, and Stephen Miran, nominated to lead the Council of Economic Advisers, said the people, who requested anonymity to discuss internal deliberations.
This is not what we have seen previously in the lead-up and it is not the “art of the deal”, which is to go hard and early and then negotiate backwards.
This is the first sign that Team Trump is worried about the inflationary impacts of its agenda and is willing to adapt.
I am surprised it did not boost equity markets, though it is worried about tomorrow’s US CPI.
The Market Ear shows a lot of exuberance is gone.
Oversold
SPX and NASDAQ futures RSI at the most oversold levels in several months.
Source: Refinitiv
Some have already puked
Volatility control “punters” do not care about emotions, they buy and sell according to volatility adjusted models. McElligott: “….we estimate selling ~-$91.9B of US Futures over the past 1m period, down to just a 40%ile allocation in Equities (3Y lookback)” (was 100%tile in mid December)
Source: Nomura
Buying TMT
TMT stocks were net bought for the 4th straight week and at the fastest pace in 3 months.
Source: GS Prime
Quality on sale
Stuff like Apple has come down aggressively, hitting support levels. Note the big hammer candle in Apple, right on the 100 day.
Source: Refinitiv
Don’t worry
This is the 5th time this cycle that the December 2025 Fed Futures rate (%) has breached current levels, but that didn’t prevent a strong equity rally over 2023-24. (DB macro)
Source: DB
It appears the market needs to break, not buckle King Trump before it will let go of the bear.
