TRUMP’s 90-DAY CHINA TARIFF PAUSE: IT AIN’T OVER TILL THE FAT LADY SINGS

 

#“It ain’t over till the fat lady sings” is an American colloquialism   meaning that the final outcome of an event is uncertain until it's completely over. It's often used in situations where a seemingly certain outcome could still be reversed. The origin of the phrase is from Richard Wagner’s opera “Die Valkure” (The Valkyrie) where the long aria by Brunhilde marks the end of a Ring cycle.

Here’s a look at what the market thinks about Trump’ s 90-day pause for tariffs on China. We explain the charts attached.

Chart: 1-3,7-10,>20 US Treasuries prices falling

Data from 2 Jan to 15 May. The prices of 1-3yr tenure [SHY Yellow], 7-10yr tenure [IEF Red] and >20yr tenure [TLT Green] ETFS of Treasuries are all falling in unison. Their prices have been standardized by Z-score to make them inter-comparable visually. So you can see that the long bond, the >20 bond which are mostly held by foreign central banks, sovereign funds and large pension funds falls the most. Which shows that trust in US assets has fallen. Notice also that the gap between each tenure has widened significantly as compared to January 2025. A sign of heightened volatility.  The benchmark 7-10 year bond which banks reference for lending has also fallen. Bond prices have a direct inverse relationship with their yields a.k.a. interest rates. The current high yields are signs of inflation, which may make the Fed think twice about cutting interest rates. The current yields are: 30yr: 4.96%  10yr: 4.52% 5yr:4.16%

 Chart: Dow Jones (DJI) and Shanghai Composite (SSEC) Difference between Resistance and Support Price.

The difference between the Resistance  and Support (S) Price is the probabilistic trading range of the financial instruments, in this case the Dow Jones Industrial Index and the Shanghai Stock Exchange Composite, the wider the range the more volatile and the greater the risk. You can see that the Shanghai Composite has a range of 4.50 % while the Dow Jones has a range of 11.9 % i.e. 3 times as volatile. R and S levels were determined by statistical modeling using flexible, unbounded Metalog Distribution Functions and Monte Carlo Simulation. So investors are less certain on what’s ahead for the DJI as compared to the SSEC.

US Dollar (DXY) daily price difference 

The ICE DXY Index tracks the USD against a basket of major currencies. For the period from 2 Jan 2025 to 14 May 2025 you can see that recently upward and downward spikes are greater and downward spikes are greater than upward spikes. In the long run the secular trend for USD is downward as China and BRICs countries increase their de-dollarization. 

Conclusion

Any euphoria in the US stock market is unsustainable. It ain’t over till the fat lady sings or perhaps when Trump drops dead.