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Good morning. |
Well… Markets are green. |
Futures are up. The VIX is cooling off. |
If you blinked, you might have missed the entire tariff cycle that whipsawed us for three days. |
Welcome to the TACO trade. |
Tariffs Are Cancelled, Obviously. |
President Trump pulled back the scheduled tariffs on eight European countries after his Davos speech yesterday. That alone flipped sentiment in a matter of minutes... |
But before you get comfortable, let's talk about what matters this morning. |
The Greenland Deal Is Still a Moving Target |
NATO Secretary General Rutte met with Trump. The headlines say there's a "framework" for a deal. But the details are murky. |
Reports suggest small pockets of land, similar to the UK-Cyprus arrangement. There would be no transfer of sovereignty. |
Rutte himself said there's "still a lot of work to be done." |
The German Finance Minister warned not to get hopes up too soon. And there are more meetings scheduled today. Any one of them could shift sentiment in either direction. |
The tariff removal is priced in. A reversal is not. |
Japan Finally Caught Its Breath |
Remember… the real story here is Japan, which took a beating in its bond market at the same time that we saw the Greenland news blow up. |
The Nikkei rallied nearly 2% overnight, snapping a five-day losing streak. JGBs are stabilizing after one of the most violent selloffs in years. The 40-year yield, which broke above 4.23% earlier this week, is no longer making new highs. |
That's good… for now. |
This matters because Japan was the real story all week. |
Not Greenland. |
The carry trade unwind, the funding stress, the global liquidity plumbing. |
All of it traced back to Tokyo. |
If JGBs hold here, risk assets get breathing room. |
If they don't, we're right back in the fire. |
The Fed Chair Announcement Could Drop Any Day |
Trump said yesterday he has "two or three" candidates left in mind. |
Polymarket odds have Kevin Warsh at 44%, Larry Rieder at 31%, and Chris Waller at 14%. |
This isn't background noise. |
A hawkish appointment reprices the entire rate trajectory. |
A dovish surprise does the opposite. |
Either way, this announcement moves markets. |
And Trump has been teasing "imminent" for a week now. |
China Just Opened the Easing Door |
PBoC Governor Pan said China has room to cut the reserve requirement ratio and interest rates this year. |
He pledged "flexible use of tools." |
At the same time, the PBoC announced it's strengthening supervision of the gold market. That briefly knocked gold off its highs overnight. |
But Goldman just raised their year-end gold target to $5,400 from $4,900. |
The dip might be a gift. |
Join Us This Morning |
There's a lot to unpack. The TACO rally looks good on the surface, but the underlying risks haven't disappeared. |
Japan is stabilizing, not fixed. |
Greenland is a framework, not a deal. |
And we could get a Fed Chair announcement at any moment. |
I'm breaking all of this down live at Market Masters this morning at 8:45 ET. |
We'll talk through how to position, what to watch, and how to trade the gap if sentiment flips again. |
Click here to join us at TheoTrade |
See you there. |
Garrett |
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