Luca Bindi, LL.M.

  “It feels to me much like it did before the 2007-8 crisis: a lot of well-informed people are quietly talking about overvaluations, while still maintaining large exposures and privately praying for a soft landing,” says MIT’s Lucas. Ultimately, the longer markets rise, the further they can eventually drop, and the greater any fallout may be. Deutsche research shows that when the S&P 500 has sold off notably more than 10 per cent, it has tended to coincide with a recession.     Free Lunch: Can recessions be good? - Financial Times  

    Big Tech’s Stranglehold on Profits Is Over as Earnings Growth Broadens - Bloomberg

Global portfolios are diversifying rapidly, looking for high-quality, liquid safe assets. With its robust institutions and unwavering respect for the rule of law, Europe is a premier destination for long-term capital. Yet European markets remain small and fragmented. EU-issued bonds total about €1tn compared to nearly €30tn in outstanding US Treasuries, meaning they are unable to absorb global demand even when combined with the total of triple A and double A-rated sovereign bonds in the euro area.  Since 2025, the euro has appreciated 15 per cent against the US dollar. We are getting a stronger currency without the strategic dividends it should deliver: cheaper financing, deeper liquidity and greater financial stability. Capital is flowing towards Europe, but without a safe asset at scale it has nowhere to anchor. We need to correct this problem, which would make the reform agendas set out by Enrico Letta and Mario Draghi financially feasible. Europe’s best bet for financial sovere...

Britain reported a £248.3bn trade deficit for goods in 2025, £30.5bn more than the previous year and the largest since the collection of comparable data began in 1997, according to figures published by the Office for National Statistics on Thursday.  By contrast, the UK exported £191.8bn more in services than it imported. That marked an increase of £16.4bn from the previous year and the largest on record. Overall, in 2025, the volume of goods and services imports increased by £32bn, or 3.4 per cent, to £959.2bn. Exports increased by £17.9bn, or 2 per cent, to £902.8bn in the year. This means that the overall trade deficit widened by £14.1bn to £56bn last year.   UK trade deficit for goods hits record high in 2025      

Assets under management at EU firms have nearly doubled to more than €20tn over the past decade, as the fund management industry has expanded three times faster than the wider banking sector, according to the blog. ECB economists question Ireland and Luxembourg’s grip on asset managers

Europe needs an “emergency mindset” on deterrence and defence if it is to survive a global disorder where strength matters above all, Denmark’s prime minister has warned.  Mette Frederiksen, who has been thrust by the Greenland crisis to the centre of a rupturing transatlantic alliance, told the FT that “a Europe that is not able and willing to protect itself is going to die at some point”.  “The old world will not come back. I am pretty sure about that,” she added. “Unfortunately, strength is one of the weapons that is useful in this new world disorder and therefore Europe has to be strong enough.” Europe needs ‘emergency mindset’ to survive, warns Danish PM    

Intellectually, at least, today’s Warsh appears the same as the one of 2010. In his IMF lecture delivered in April 2025, he stressed not only the Fed’s “institutional drift”, but also its recent “failure to satisfy an essential part of its statutory remit, price stability. It has also contributed to an explosion of federal spending. And the Fed’s outsized role and underperformance have weakened the important and worthy case for monetary policy independence.” He made other criticisms, the most pointed being that “the Fed has been the most important buyer of US Treasury debt — and other liabilities backed by the US government — since 2008”. He asserts: “Fiscal dominance — where the nation’s debts constrain monetary policymakers — was long thought by economists to be a possible end-state. My view is that monetary dominance — where the central bank becomes the ultimate arbiter of fiscal policy — is the clearer and more present danger.” For Warsh, then, easy money is the road to ruin.  ...

The strengthening of the euro could proceed together with global fragmentation and protectionism, also an energy crisis that would raise inflation expectations, default and term premiums namely yields on the longer end of the curve - that would dramatically hit asset prices. In that case restrictions to domestic consumption, similarly to a pandemic lockdown, would be helpful to contain the financial damage.    Implications of a stronger Euro currency | Luca Bindi on Linkedin

    Gold and silver extend declines after historic slump  

  So there are real tensions and questions that accompany Trump’s pick of Warsh. If his nomination is confirmed by the Senate, will the new Fed chair be able to persuade the rest of the policy-setting Federal Open Market Committee to shrink the Fed’s balance sheet just weeks after they stopped quantitative tightening? If he does succeed, will this steepen the US yield curve, raising the price of long-term government borrowing while lowering short-term debt financing costs? Will the conviction of a productivity miracle survive contact with a messy real world for much longer? And how will the new Fed chair’s views change when the data is less than obliging as it will be on many occasions?   Kevin Warsh will pivot Fed to conviction economics

And financial markets might not co-operate with Warsh’s views. The problem with lowering the federal funds rate further from here, when the economy is already growing rapidly, is that it would increase the risk of financial instability, specifically a melt-up in the stock market that could be followed by a meltdown. Lowering the federal funds rate would further weaken the dollar, potentially reviving inflation and pushing bond yields higher. Furthermore, at his likely first meeting as FOMC chair on June 16-17, the majority of Warsh’s colleagues on the committee might not co-operate in backing lower interest rates if inflation remains persistently above the Fed’s 2.0 per cent target. The US economy is likely to be booming then thanks to the fiscal stimulus provided by higher tax refunds in the coming months, resulting from legislation last year. Warsh could be one of the few dovish dissenters at his first FOMC meeting. Markets are set to test Warsh 

    #markets #investing #currencies | Jonathan Baird,CFA