Market Before The Open, Monday 14 April

Last updated on Apr 14, 2025

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Dizzy Yet?

by Alex King, CEO, Cestrian Capital Research, Inc

The market is in a very simple setup at the moment in my opinion and does not require extensive analysis. Changes to global trade policy are of course going to impact markets and the extent to which the existing arrangements are changed matters to the degree of impact to markets. In essence we have a ideological change afoot within the US Executive Branch, a shift from deregulation to re-regulation of trade, from limited government to maximal government. This ideological shift is tempered by money, as is always the case with ideas in politics. Why did the Soviet Union end in ruin? Was it because of political reasons? It was not. It was because the political arrangements meant the economy was unsustainable which meant the polity failed. Which is why China doesn’t have the same economic policy as the Soviet Union. Because you always have to have the money to pay for your ideas.

Right now the limits to government intervention in trade are being tested between the US and China and I think it is fair to say that no-one knows where the line will hold. Mixed messages from the US Executive Branch mean that it is difficult to set a course in markets. For now I think we will continue to see heavy volatility, until a direction is set. If ideology wins out over money, we’ll be in a bear market. If money wins out over ideology, the bull will resume. I don’t think it’s any more complicated than that. The single most important indicator right now is the 10yr yield. If money is winning, bonds will get bid and the yield will fall. If ideas are winning, bonds will be sold and the yield will rise. If bonds are getting bid, so too will equities, and the reverse is also true.

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