In this wide-ranging note, Stephen Jen offers a two-layered view of the current macro landscape: one focused on the underlying, structural trends (“the foundational level”) and the other on the noisy, policy-driven overlay, dominated by tariffs, fiscal pivots, and geopolitical posturing.
At the foundational level, Jen sees a benign global macro outlook shaped by fiscal divergence, where the US is tightening and Germany and China are easing, resulting in growth convergence and modest disinflation. But layered over this is a volatile trade war, one that could escalate before it resolves. Jen draws a historical parallel to siege warfare: the US is building a big enough army of tariffs to force negotiation, not necessarily a prolonged fight.
The note critiques popular market narratives, particularly the false equivalence of tariffs and a strong dollar. Jen reiterates his view that the overvalued dollar was part of the problem, and that expecting tariffs to support it defies logic. He also argues that fiscal consolidation is far more likely than the consensus believes, and that the Fed and Treasury are laser-focused on managing bond yields, not equities.
In Europe, Jen emphasises the asymmetric impact of Germany’s stimulus, warns of widening intra-EU divergence, and calls attention to shifting views on ESG and defence. Finally, he reflects on China’s technological progress, arguing that many of the “Made in China 2025” goals have been quietly met, and shares some longer-term observations on markets, manufacturing, and geopolitics.
Key Quote
“The overvalued dollar was one key motivation for the tariffs in the first place, and tariffs, in turn, drive the dollar stronger? This makes no sense.”
Table of Contents
-
Bottom line
-
A benign ‘foundational’ level outlook
-
Trade tariffs
-
Partisanship in the U of M inflation expectations survey
-
A ‘bond put’, not an equity put
-
Made in China 2025: most of the objectives have been achieved
-
Europe’s defence spending
-
Financial market outlook
-
Some musings
To read more of our latest macro and market insights, click here to start a free trial of our research.
Disclosure
This communication is issued by Eurizon SLJ Capital Limited (“ESLJ”), a private limited company registered in England (company number: 09775525) having its registered office at 90 Queen Street, London EC4N 1SA, United Kingdom. ESLJ is authorised and regulated by the Financial Conduct Authority (FRN: 736926). This communication is treated as a marketing communication intended for professional investors only and is provided only for information purposes. It has not been prepared in accordance with legal and regulatory requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research. It does not constitute research on investment matters and should not be construed as containing any recommendation, advice or suggestion, implicit or explicit, with respect to any investment strategy or financial instruments, or the issuers of any financial instruments, or a solicitation, offer or financial promotion relating to any securities or investments. ESLJ and its affiliates do not assume any liability whatsoever for the contents of this communication, save to the extent agreed in any written contract entered into between ESLJ and the recipient, and do not make any representation or warranty as to the accuracy or completeness of any information contained in this communication. Views are accurate as at the time of publication. Opinions expressed by individuals are their own and do not necessarily reflect those of ESLJ or any of its affiliates. The value of any investment may change and an investor may not get back the original amount invested. Past performance is not an indicator of future performance. This communication may not be reproduced, redistributed or copied in whole or in part for any purpose. It may not be distributed in any jurisdiction where its distribution may be restricted by law and persons into whose possession this communication comes should inform themselves about, and observe, any such restrictions.
ESLJ-280325-R1
Subscribe to our insights
If you are interested in our content, please sign up below and we will deliver Eurizon SLJ insights right to your inbox.
I consent to my data being collected and stored for the purposes of providing me information regarding my enquiry and related services. If you have any questions about your data please contact us at research@eurizonslj.com
Our Research
Our written research products aim to provide unique and orthogonal insights on key global economic and policy issues in a timely fashion.
