Dimon

The Gryning Times

Apr 15, 2025

US stocks rose Monday after a volatile week, as investors welcomed temporary tariff exemptions.
The S&P 500 and Dow Jones climbed nearly 0.8%, while the Nasdaq 100 added 0.6%.
Automakers also gained after Trump signalled potential relief from the 25% auto tariffs, noting companies need more time to shift production to the US.
Ford, GM, Stellantis, and Rivian jumped 3% to 6%, while Tesla edged higher and Toyota and Honda added over 1%.
Goldman Sachs rose 1.9% after reporting strong quarterly earnings.

The March inflation numbers came in last Thursday at 2.4% (see our Long Form section or click here).

The last time we saw a number that low was September of last year. Before that, it was Q1 of 2021.

What happened in September of last year? The Fed kicked off its easing campaign with a 50 basis point rate cut. So, headline CPI is running at a level that supported the launch of an easing campaign, and an aggressive start to it.

Add to this, as of April 1, the Fed has dramatically dialled down its quantitative tightening programme (effectively ending it) because there were "signs of increased tightness in money markets".

This move looks like a clue that something in the financial plumbing might be breaking.

If we recall back to 2019, it was similarly "strains in the money markets" that forced the Fed to slash rates and go back to expanding the balance sheet (i.e. quantitative easing – QE).

With this in mind, let's revisit some things Jamie Dimon (JP Morgan CEO) said about liquidity conditions back in October and what he said this past Friday.

Back in October, he warned about the risk of volatility in the Treasury market.

He complained that the banks have tonnes of excess cash but can't use it efficiently due to regulatory constraints. It affects their ability to provide liquidity in the Treasury market while the Fed is simultaneously extracting liquidity from the Treasury market.

He implied that we will likely see another episode of big Treasury market volatility, caused by the Fed's quantitative tightening.

Fast forward six months, and the Fed is still extracting liquidity from markets, though now only at a rate of $5 billion per month (as of April 1). Plus we've just had a huge spike in the 10-year yield (yellow box).