The University of Michigan Consumer Sentiment Survey plummeted today, and the year ahead inflation expectations by respondents in the survey reached 6.7 percent, the highest since 1981. Not exactly a year you want to see next to your “not since” statistic.
US Treasuries continued selling off in the foreign trading sessions and through the US one so far today, strongly suggesting that foreign investors are quite literally selling America right now. The Treasury Inflation Protected Securities (TIPS) market, treasury bonds that actively adjust for changes in inflation, is suggesting there are serious liquidity issues in a market considered to be “risk-free.” Meanwhile, gold is way up and the dollar is down. This is not exactly a dynamic that suggests any kind of faith in the United States right now.
BMO: “.. the U.S. dollar also seems to have officially lost its safe-haven status, in part due to the unique driver of this storm. Just since the reciprocal tariff regime was first unveiled, the yen and euro have popped about 5%, and even the loonie has soared ..”
[image or embed]
— Carl Quintanilla (@carlquintanilla.bsky.social) April 11, 2025 at 10:49 AM
If you compare the extreme movements and the gaps made in the past week of insane stock market action, it resembles the extreme movements and gaps made during March 2020. This is all highly suggestive of liquidity issues, as investors are pulling out of markets because of the vast uncertainty created by Trump’s tariffs and lawlessness. Add in the fact that foreign investors are clearly pivoting away from the United States forever to some degree, and there are just less players in the daily machinations of the market right now than there would be in more certain times.
Just because it looks like we are currently having similar liquidity issues to 2008 and 2020 does not mean those are the paths we are guaranteed to follow. A lack of liquidity is not the kind of thing that is damning until it is, it’s descriptive more than anything. If Trump were to lift the 145 percent tariff on China along with the 10 percent universal tariff, it’s very likely these liquidity issues would abate as more money rushes back into the market and restores some kind of normalcy. What makes liquidity scares so scary is if they persist, the wild market volatility that it creates eventually will take out huge leveraged positions. That is the short story of the Lehman Brothers collapse in 2008.
In 2020 we had a crisis where the market froze and the Fed had to rush in to relieve the pressure, and that is another area of concern for the market. European officials have already started thinking about what may happen if Trump does not give them access to dollars in a crisis. Trump has asked the Supreme Court to let him fire top officials at the National Labor Relations Board and the Merit Systems Protection Board, which if they let him, would pave the way for Trump to argue that he can fire Fed chair Jerome Powell too. The Fed’s independence is one of the American economy’s greatest assets, as markets across the globe operate on the presumption that the most powerful central bank in the world will have markets’ best interests in their policymaking agenda.
But if the Fed is forced to adhere to Trump’s agenda and not the market’s, that’s even more reason to pull money out of an uncertain market. The risks are endless everywhere you look, and it is creating a kind of uncertainty you only see in crises. Unlike 2008 or 2020 though, this is a crisis of one man’s creation, and it could end with one Truth Social post. If Trump persists with his bid to destroy the global economy, it will continue to warp markets, sap them of liquidity, ultimately making it inevitable that the liquidity issues in the market will expand into something larger like they did in 2008 and 2020.
GET SPLINTER RIGHT IN YOUR INBOX
The Truth Hurts
