Jonathan LaBerge
@jlabergebca.bsky.social
Strategist at BCA Research in Montreal. @JLaBergeBCA on X.
So, I remain a cyclical dollar bull. Two things could change that: the US substantially reduces import tariffs back to single-digit territory, or I see strong evidence that US tech sector earnings will be procyclical rather than defensive.
June 27, 2025 at 7:15 PM
So, I remain a cyclical dollar bull. Two things could change that: the US substantially reduces import tariffs back to single-digit territory, or I see strong evidence that US tech sector earnings will be procyclical rather than defensive.
It is true that US tech stocks are overvalued, but the attached chart shows that US earnings tend to outperform global ex-US during recessions and other major growth slowdowns.
June 27, 2025 at 7:15 PM
It is true that US tech stocks are overvalued, but the attached chart shows that US earnings tend to outperform global ex-US during recessions and other major growth slowdowns.
Then there is the fact that US assets look comparatively attractive in a recession. US long-maturity yields are elevated versus other DM countries.
June 27, 2025 at 7:15 PM
Then there is the fact that US assets look comparatively attractive in a recession. US long-maturity yields are elevated versus other DM countries.
Is it likely that the world, which is much more goods exports oriented than the US, is going to suffer less if US import tariffs remain in effect? I don’t think so.
June 27, 2025 at 7:15 PM
Is it likely that the world, which is much more goods exports oriented than the US, is going to suffer less if US import tariffs remain in effect? I don’t think so.
Both of those perspectives are likely to shift over the coming several months. Why? Because weaker US economic surprises versus the rest of the world are occurring due to US import frontrunning, which has made the global ex-US economic data look better than it actually is.
June 27, 2025 at 7:15 PM
Both of those perspectives are likely to shift over the coming several months. Why? Because weaker US economic surprises versus the rest of the world are occurring due to US import frontrunning, which has made the global ex-US economic data look better than it actually is.
This happened because investors have made the bet that the trade war will hurt the US more than the world, and that US policies will hurt foreign holders of US financial assets (Miran’s “duration agreement”, section 899, etc).
June 27, 2025 at 7:15 PM
This happened because investors have made the bet that the trade war will hurt the US more than the world, and that US policies will hurt foreign holders of US financial assets (Miran’s “duration agreement”, section 899, etc).
So, a rising equity market should normally mean a flat-to-down dollar. It is the fact that the dollar failed to rally when the equity market fell from January to April that has caused investors to question its safe haven status.
June 27, 2025 at 7:15 PM
So, a rising equity market should normally mean a flat-to-down dollar. It is the fact that the dollar failed to rally when the equity market fell from January to April that has caused investors to question its safe haven status.
The US has also seen a rise in its trade dependence, but less so than for global. Given that trade is a relatively volatile component of GDP, an economy that is less trade-oriented in today’s world is an economy that is comparatively defensive.
June 27, 2025 at 7:15 PM
The US has also seen a rise in its trade dependence, but less so than for global. Given that trade is a relatively volatile component of GDP, an economy that is less trade-oriented in today’s world is an economy that is comparatively defensive.
Post-April dollar weakness is not surprising: the US equity market has recovered very significantly since its post-Liberation Day low, and the dollar has become a defensive currency over time due to a rise in global exports as a share of GDP.
June 27, 2025 at 7:15 PM
Post-April dollar weakness is not surprising: the US equity market has recovered very significantly since its post-Liberation Day low, and the dollar has become a defensive currency over time due to a rise in global exports as a share of GDP.
Given the ongoing slowdown in the US labor market, such a shock would almost certainly be recessionary.
June 13, 2025 at 6:51 PM
Given the ongoing slowdown in the US labor market, such a shock would almost certainly be recessionary.
If the Middle East conflict escalates to the point that is causes a doubling in the price of oil, expect US gasoline prices to break $5/gal, higher than what we saw following Russia’s invasion of Ukraine in 2022.
June 13, 2025 at 6:51 PM
If the Middle East conflict escalates to the point that is causes a doubling in the price of oil, expect US gasoline prices to break $5/gal, higher than what we saw following Russia’s invasion of Ukraine in 2022.
Roughly-speaking, we will need to see oil at $100/bbl before US gasoline prices should be expected to break above the psychologically-important level of $4/gal.
June 13, 2025 at 6:51 PM
Roughly-speaking, we will need to see oil at $100/bbl before US gasoline prices should be expected to break above the psychologically-important level of $4/gal.
The chart below shows the price of gasoline along with its predicted value based on the current price of oil and the relationship between the two on a rolling 3-year basis.
June 13, 2025 at 6:51 PM
The chart below shows the price of gasoline along with its predicted value based on the current price of oil and the relationship between the two on a rolling 3-year basis.
Why? I have seen a lot of estimates that regress the price of gasoline on the price of oil over the past 20 years. To me, that modeling approach introduces errors given the price impact of the enormous increase in US oil production that began over a decade ago.
June 13, 2025 at 6:51 PM
Why? I have seen a lot of estimates that regress the price of gasoline on the price of oil over the past 20 years. To me, that modeling approach introduces errors given the price impact of the enormous increase in US oil production that began over a decade ago.
A secondary question that emerges from this crisis is what impact a major oil shock would have on the US consumer. In my view, the price feedthrough from oil to US gasoline prices is probably a bit lower than conventional estimates would suggest.
June 13, 2025 at 6:51 PM
A secondary question that emerges from this crisis is what impact a major oil shock would have on the US consumer. In my view, the price feedthrough from oil to US gasoline prices is probably a bit lower than conventional estimates would suggest.
Compared with the past three true recessions (1990-1991, 2001, and 2008-2009) year-over-year job growth today is weak and is close to the low end of what we have seen at the onset of recession. If annual payroll growth moves below 1%, watch out.
June 6, 2025 at 3:54 PM
Compared with the past three true recessions (1990-1991, 2001, and 2008-2009) year-over-year job growth today is weak and is close to the low end of what we have seen at the onset of recession. If annual payroll growth moves below 1%, watch out.
It is important for investors to remember that the US labor market is still vulnerable to a shock.
June 6, 2025 at 3:54 PM
It is important for investors to remember that the US labor market is still vulnerable to a shock.
I agree that the jobs market isnt yet showing a major impact on the US economy from the imposition of tariffs. It may be too early to see the effect of tariffs on the jobs market, or we may first have to see a significant increase in consumer prices before consumers balk and raise their saving rate.
June 6, 2025 at 3:54 PM
I agree that the jobs market isnt yet showing a major impact on the US economy from the imposition of tariffs. It may be too early to see the effect of tariffs on the jobs market, or we may first have to see a significant increase in consumer prices before consumers balk and raise their saving rate.
The US might avoid a recession over the coming year, but that 3% figure will rise at some point.
June 4, 2025 at 4:05 PM
The US might avoid a recession over the coming year, but that 3% figure will rise at some point.
I disagree with that. The flip side of there being no recession in the 2010s was that growth was very poor in the first half of that decade. And since 2020, US aggregate demand has been propped up by the deployment of excess savings, which are now likely gone.
June 4, 2025 at 4:05 PM
I disagree with that. The flip side of there being no recession in the 2010s was that growth was very poor in the first half of that decade. And since 2020, US aggregate demand has been propped up by the deployment of excess savings, which are now likely gone.