Tariffs, Taxes, and Treasury Trouble – Marc Chandler on the Economic Risks Beneath Market Highs
Rate cuts delayed, deficit concerns rising, and tariffs looming - Marc Chandler dissects the macro puzzle.
In this July 3rd KE Report interview, Marc Chandler of Bannockburn Global Forex unpacks a surprising jobs report, looming US fiscal and trade decisions, and the broader macro forces weighing on the US dollar. With markets near all-time highs and uncertainty escalating on multiple fronts, Chandler shares what could shake the current calm - and what investors should really be watching.
Key Themes from Mark Chandler
🧩 Strong Jobs Report - But Don't Be Fooled
“Everybody was leaning towards a weak jobs report… Instead, it came in better than expected.”
Despite a beat in headline payrolls and a dip in unemployment to 4.1%, Chandler warns this doesn’t shift the Fed’s stance significantly. Markets removed any serious July rate cut bets, and confidence in a September cut is waning.
🔹 Takeaway: The Fed is still likely to cut in September - but economic noise could delay action.
📉 Labor Force Shrinks, Immigration Slows
“Immigrants made up a large part of the increase in the labor force… That’s no longer going to be there.”
Chandler highlights falling labor participation and reduced immigrant labor as key structural shifts - reinforcing slower growth in both supply and demand for workers.
🔹 Takeaway: Slower labor market dynamics could resurface as a drag on growth later this year.
💰 Tariffs & Tax Cuts = Higher Deficits
“We’re going to see a larger deficit… and greater disparity of wealth and income.”
With tax cuts advancing and new tariffs potentially rolling out next week, Marc sees a fiscal picture getting messier - and possibly more inequitable. Yet for markets, more government spending can keep the party going… for now.
🔹 Takeaway: More spending keeps asset prices afloat - but mounting deficits raise long-term risks.
⚠️ Treasury Demand Shifting, Exit Tax Risk Growing
“There’s a quiet, unspoken exit tax risk - and that’s dollar depreciation.”
Marc sees growing risk in the US funding model - with foreign buyers less dominant and potential political pressure to tax capital inflows. This under-the-surface risk could erode long-term confidence in Treasuries and the dollar.
🔹 Takeaway: The global status of US debt may be under slow erosion - watch capital flow signals.
🌍 Global Divergence Could Weigh Heavier on the Dollar
“By the time the Fed resumes cuts, other central banks may be done.”
Marc flags a key shift ahead: the Fed is late to the rate-cut cycle, just as the global economy begins to slow. This could push the US dollar further down in H2.
🔹 Takeaway: Rate divergence could accelerate dollar weakness in Q3–Q4.
Click here to listen to the full interview and get Mark’s full global macro view
Bold analysis, honest insights, and the key macro catalysts to watch.
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