There was an interesting point toward the end of last week's Flow Show note by Michael Hartnett (here if you missed it), which was the following: for all the jawboning, the US is unlikely to go full-bore China trade war, which "would be a big political misstep for Trump" as it would "allow 2nd wave of inflation, and meanwhile China is less reliant on exports to the US, which are down to just 2.8% of China GDP today vs. 7.2% in '07" and furthermore "neither side is likely to pursue “MAD” tech war because while US and allies control >90% of global semiconductor manufacturing, China extracts 60% and processes 85% of world's rare earth minerals"

So fast forward to today when in his latest weekly Flow Show (also available to pro subs) in which Hartnett doubles and says that the "hot 3% US CPI in January was a "blessing-in-disguise" for bonds & stocks" as the rising inflation means "Trump must go “small” not “big” on tariffs & immigration in coming months to avoid fanning 2nd wave of inflation." Which means that according to Hartnett, Trump is playing 4D chess, which may be a stretch but who knows.

So assuming Trump is thinking 5 steps ahead, Hartnett - who last week explained why he is long BIG (Bonds, International, Gold) - doubled down saying that 5% was "a multi-year top for 30-year Treasury yield" as the impact of inflation, tariffs, immigration (big or small) will be more negative than positive for US consumers & labor market H1'25 (a point he first made last June). That said, he notes that catalysts for a dramatic H1 move lower in bond yields below 4% are scarce, due to…