Steve Englander: Well, I am more optimistic that he will come to some trade deals with some of the other trading partners that they have. Europe seems to be close. There seem to be a couple of others that are close. And I would still lean towards the interpretation that the nastiness reflects the desire to put pressure and to push these frameworks past the finish line. The copper and pharma is a bit different because he sees a national security element in this that in case of some international geopolitical issue, he does not want to be cut off from antibiotics and heart medicines and all the stuff that everybody uses here. So, there may be more to that. In addition, I think that the most popular drugs now are the weight loss drugs and they are mostly imported from Europe and he is questioning why that is the case. But near-term I am more optimistic that we will get past the ninth without there being a markets disaster and that we will see some framework agreements go through and it will be risk positive.
What is your take on the markets? Now, we have not seen very significant moves arising as an impact of the tariff announcement that we have seen coming in this week. So, do you think the markets are sort of under-pricing the long-term volatility that may arise due to these developments or do you see there is, like you said, you are optimistic about it, so what is driving this optimism? Is it complacency due to confidence in earnings going forward?
Steve Englander: Well, earnings continue to be strong and I would say that the productivity numbers which are often correlated with earnings look as if they are going to be strong as well. So, there is an element that the strong earnings numbers could have more persistence than say people thought six months ago or a year ago. On the optimism, he has gotten a lot of what he wants and if he can get his baseline tariffs and maybe a little bit more that he will be inclined to take that as a deal for now. But I do think that one issue and certainly that markets are dealing with is one there is the uncertainty about what he is going to do.
But there is also uncertainty about how the markets are going to react. In April, the dollar fell when yields went up and when equity prices went down. But if you have been tracking the dollar against other currencies over the last two months, the response has been the opposite. So, the market, apart from not knowing what he is going to do, even if they did know, is genuinely confused about how markets will react. So, we are going to go through a period of what you would call price discovery where investors are trying to figure out just what is the model in the market to gauge responses.
But also wanted your thoughts on the commodity markets because of the kind of tariffs that we have seen over the last few days. In February, Donald Trump had proposed an investigation for imposing tariffs on copper and now again 50% tariff has been imposed. What kind of impact will this have on the copper market and apart from copper, even on steel and aluminium tariffs have been imposed earlier over the last few months. What kind of impact will this have on the commodity market globally?
Steve Englander: Well, what it does, it drives a wedge between onshore prices in the US, which are going to be much higher, and leads commodities exporters to divert their exports away from the US because they have to look at what they get net of the tariffs and divert it elsewhere. So, it means probably cheaper copper in the rest of the world, but more expensive copper in the US. Exactly what the copper issue is in the US, that seems to be so significant, is unclear, but it does look like if you are a copper exporter, it is going to be tough going.
But apart from that if we look at other commodities, like the safe haven asset like gold, what is your take on diversification into these assets given there is tariff uncertainty when it comes to specific sectors like pharma and copper as we just discussed?
Steve Englander: Well, gold has been tracking the dollar pretty well and I would not exaggerate the safe haven aspect. It is a safe haven, but now the uncertainty about asset markets, the volatility, the weakness in the dollar except for the last day or two, that is helping support dollar. We actually have forecast of gold going up to 4,000 by Q3 2026. So, we are kind of optimistic that the rally will continue.