The End Of The Easy US Stock Bet Has Been Good To Contrarians

For decades, the US regulators who work to keep inflation down and economic growth up, ensure markets are competitive and transparent, safeguard elections, and protect workers, consumers and investors have operated largely free of political influence. The Federal Reserve, the Securities and Exchange Commission (SEC), the Federal Election Commission, and more than a dozen other regulatory agencies have a remit to make and enforce rules under leaders who are protected from being removed by the president. Their independence is meant to guarantee that their decisions serve only one master: the public.

President Donald Trump wants to upend that arrangement. The president and his allies are trying to exert control over these independent federal agencies, which they view as an extraconstitutional “fourth branch” of government. Trump has issued an order that aims to consolidate regulatory oversight in the White House and has fired several commissioners of independent agencies — moves with no precedent in modern history.

The fired regulators have argued their removals are a breach of long-settled law. But the Supreme Court’s conservative majority appears sympathetic to Trump’s consolidation of authority over the regulators: On May 22, the justices temporarily blocked a lower court from overturning the firings of members of the National Labor Relations Board (NLBR) and the Merit Systems Protection Board (MSPB). The decision sets up a reckoning over the legal foundation of regulators’ independence, with sweeping implications for the government’s role in the economy and society.

In its broadest sense, an independent agency can mean any executive body that doesn’t report to a cabinet secretary. These include non-regulatory agencies like the Social Security Administration, the National Aeronautics and Space Administration or the Central Intelligence Agency.

But Trump is particularly focused on gaining influence over independent agencies that meet the narrower definition of holding regulatory power over markets, utilities, the workplace and other parts of the public sphere. These include financial regulators such as the Fed, the SEC and the Commodity Futures Trading Commission, and others with important enforcement functions such as the NLRB, the Nuclear Regulatory Commission, and the Occupational Safety and Health Review Commission. Though housed in the executive branch, independent regulators often have quasi-judicial and quasi-legislative functions: They don’t just execute rules, but also enforce and make them.

Congress has come up with a number of mechanisms to insulate these bodies from political pressure. They’re often led by a director with tenure protection or multi-member boards with staggered terms of between five and 14 years. Those boards must consist of members from more than one political party. And though directors and commissions are generally appointed by the president and confirmed by the Senate, the president typically can fire board members only “for cause” — neglect of duty or malfeasance — not at will.

In many cases, agencies are even more removed from political influence — or, some would say, accountability — by having budgets that aren’t subject to annual congressional spending bills. The Federal Deposit Insurance Corporation (FDIC) and the National Credit Union Administration (NCUA), for example, are funded by charging deposit insurance premiums to banks and credit unions, and the Fed and the Consumer Financial Protection Bureau (CFPB) get income from the interest on assets held by the Fed.

In the 19th century, corruption was rampant in the railroad industry. Companies often bought the approval of politicians and newspaper owners by offering them free passes and discounted stock. Railroads used their monopoly power to set high rates.

The Grange movement, a collection of rural and agricultural interests harmed by the high railroad rates, pressed Congress to do something. And so in 1887, Congress passed the Interstate Commerce Act, which established the Interstate Commerce Commission to regulate the industry. It was the first federal regulatory agency.

Though it was originally created inside the Interior Department, the ICC had many of the hallmarks of the independent regulatory agencies that we still see today: Instead of a single director, it was headed by a board of five commissioners appointed by the president and confirmed by the Senate. Those board members had staggered, six-year terms, so the president couldn't replace them all at once. They could only be removed for “inefficiency, neglect of duty, or malfeasance in office.” And no more than three commissioners could be from the same political party.

Other regulatory agencies controlled by boards and commissions with staggered terms — the Federal Trade Commission, and Federal Reserve Board, the Federal Communications Commission, and more — followed in the decades after.

In a unanimous 1935 decision in Humphrey’s Executor v. United States, the Supreme Court said the president didn’t have the power to fire members of the FTC for solely political reasons. The landmark decision was one of several 20th century rulings that affirmed the independence of this class of agency.

Trump’s attempts to establish more control over regulators have two prongs of attack: firing personnel and changing policy.

The president has dismissed several Democratic commission members of independent agencies, who are historically seen as having protection across administrations. Those included members of the NLRB, the MSPB, the FTC, the NCUA, the Consumer Product Safety Commission (CPSC), and more. Several have challenged their dismissals in court, citing Humphrey’s Executor. Some agencies were left without a quorum to function after the firings.

In a Feb. 18 executive order, Trump aimed to bring rulemaking by independent agencies under the sway of the White House. He ordered agencies to establish a White House liaison position and submit all proposed regulations to the White House’s Office of Information and Regulatory Policy for approval. That office had previously exempted independent agencies from review.

More than two dozen lawsuits have directly challenged or cited Trump's executive order, according to data compiled by Bloomberg Law. At least one agency, the CPSC, defied the order by moving to propose a rule on lithium-ion batteries without getting White House signoff. Trump fired the three Democratic members of that commission on May 8, and on May 21, they sued, arguing that he had exceeded his authority. (The two remaining members of the commission — both Republicans — later voted to withdraw the rule proposal.)

Among other agencies, the order names the Federal Election Commission, which regulates campaigns for federal office, as subject to this new oversight. The Democratic National Committee went to court, calling the order an “unprecedented assertion of presidential power.”

Trump is also disrupting independent agencies in the same ways that he’s singling out bureaucrats directly under his control in the cabinet-level departments. With an April 18 executive order, Trump intended to reclassify about 50,000 career civil servants as positions he can hire and fire, and Elon Musk’s Department of Government Efficiency hasn’t spared regulators in its search for ways to cut costs.

Trump has made threats — which he later recanted — to fire Federal Reserve Chairman Jerome Powell. On May 29, at their first in-person meeting since the inauguration, Trump told Powell he thought it was a mistake not to lower interest rates, the White House said.

The president’s February executive order, which put the Fed under OIRA’s regulatory jurisdiction, specifically carved out an exemption for Fed functions related to the conduct of monetary policy. Instead, it applies only to functions “directly related to its supervision and regulation of financial institutions.”

Economists generally agree that political influence on the Fed would impair investor trust. Trump’s Treasury secretary, Scott Bessent, said in April that the Fed’s independence in setting monetary policy was a “jewel box that has got to be preserved.”

But as Peter Shane, who teaches law at New York University, argues, Trump is still walking a tightrope with his executive order. Ultimately, the only way to enforce the regulatory policy is to oust Fed officials who don't comply — and many of those same officials are also responsible for monetary policy. “Members of the Fed cannot be half-fired, half-empowered,” he said.

“The Constitution vests all executive power in the president and charges him with faithfully executing the laws,” Trump’s February executive order begins. “However, previous administrations have allowed so-called ‘independent agencies’ to operate with minimal presidential supervision. These regulatory agencies currently exercise substantial executive authority without sufficient accountability to the president, and through him, to the American people.”

That language is a succinct distillation of the so-called Unitary Executive Theory. That school of constitutional interpretation — which has been growing in conservative legal circles since Ronald Reagan’s time — holds that the Founders specifically intended the president to have broad authority over the bureaucracy. The theory is the basis for efforts from Office of Management and Budget director Russell Vought and other administration officials to dismantle the federal workforce and bring independent agencies under White House control. The CFPB, for instance, is operating without a full-time director and instead is being run by Vought, who has said the agency, created in the aftermath of the Great Financial Crisis and a longtime target of conservatives, would conduct only the minimum functions required by law.

Proponents often point to a quotation from James Madison, the fourth US president: “If any power whatsoever is in its nature Executive, it is the power of appointing, overseeing, and controlling those who execute the laws,” Madison, then a House representative, said in 1789.

Project 2025, the manifesto for a more muscular presidency authored by Vought and other conservative thinkers, urged Trump to directly challenge the Humphrey’s Executor decision. On Feb. 12, the Justice Department stated that it would encourage the Supreme Court to overturn it.

In recent years, the court’s conservative majority has indicated a willingness to give the president the power to fire leaders of independent agencies — with the exception of the Fed.

Recent Supreme Court decisions have already limited the scope of Humphrey’s Executor: In 2010, the court weakened for-cause removal protections, and in 2020, in Seila Law LLC v. Consumer Financial Protection Bureau, it found that the CFPB’s single-director structure, with for-cause removal protection, was unconstitutional, while agencies with a multi-member board structure are constitutional. Critics said the distinction in the latter case was not based on a coherent legal principle and was rather an arbitrary attempt to preserve the independence of the Fed, which is led by a board of seven governors, while limiting the independence of other agencies.

In May, the court ruled that fired NLRB member Gwynne Wilcox and MSPB member Cathy Harris can’t return to their jobs as their legal challenges continue. The majority wrote that Trump could remove the officials “because the Constitution vests the executive power in the president.” However, In its decision, the court said the ruling wouldn’t apply to the Fed because it’s a “uniquely structured, quasi-private entity.”

Writing for three liberal justices in dissent, Justice Elena Kagan said the majority had created “a bespoke Federal Reserve exception” to reassure markets.

After the case moves through lower courts, it may return to the Supreme Court.

Proponents have long argued that independence can contribute to better, more impartial decision-making driven by expertise. This is important not only for highly technical subjects – interstate electricity transmission and telecommunications, for example – but also for finance. Political interference in financial regulation may lead to greater unpredictability, as regulatory philosophies shift based on which party controls the White House, or undue influence by moneyed interests. “Time and again in the past decades, national and regional financial crises have been deepened and worsened by political interference in financial sector regulation and supervision,” the International Monetary Fund found in a 2004 review.

After the Supreme Court allowed Trump’s firing of Wilcox and Harris to temporarily stand, Jefferies Group LLC warned in a note that markets were hardly reassured by the exception for the Fed. “The court’s order suggests they’ll likely support expanded presidential power in upcoming decisions, giving credence & support to the Unitary Executive Theory,” the note said. “We believe expanded presidential power is bearish for risk assets & will further erode the concept of American exceptionalism in markets.”

In her dissenting opinion in Seila Law, Kagan rebutted Justice Clarence Thomas's assertion that \

“So year by year by year, the broad sweep of history has spoken to the constitutional question before us: Independent agencies are everywhere,” she wrote.

Source: Bloomberg Europe

(May 30): The court ruling that blocked much of President Donald Trump’s sweeping tariffs threatens to blow what some economists estimate as a US$2 trillion (RM8.5 trillion) hole into the US fiscal outlook over the coming decade, should the judgement stay in place.

The ruling could also present a new obstacle for Republicans who are relying on the revenue to help offset the cost of a roughly US$4 trillion tax cut moving through Congress.

“At face value, this ruling will take away billions of dollars of prospective tariff revenue” annually, said Douglas Elmendorf a Harvard Kennedy School professor and former director of the Congressional Budget Office — a nonpartisan arm of the US legislature.

A federal appeals court Thursday paused the Court of International Trade’s Wednesday ruling striking down a swath of Trump’s levies, and the White House is pushing to overturn the judgement entirely, aiming to appeal to the Supreme Court as soon as Friday.

If the CIT ruling survives appeal, it would remove duties that would have raised nearly US$200 billion on an annual basis, according to estimates by Goldman Sachs Group Inc and Citigroup Inc. Trump and his aides had been relying on that increased revenue to get Republican lawmakers united behind the president’s “big beautiful bill” tax-cut package.

Plan B

The US$2 trillion in added revenue over a decade would have gone some way towards offsetting the cost of the tax cuts, as measured by the congressional Joint Committee on Taxation, as the legislation’s spending reductions aren’t expected to cover even half the tab.

Failing judicial success, Trump’s trade team would have to stitch together duties using executive authority other than the one struck down. But the process would take months, and decisions could still end up facing legal challenges, economists say. Treasury Secretary Scott Bessent said on Fox News Thursday that “anything that the courts do to get in the way both harms the American people in terms of trade and in terms of tariff revenue”.

Even a short-term hit to revenue would pose problems: the government is currently barred from raising net new debt, and the Treasury has been using special accounting manoeuvres to make good on payments. Monthly customs revenue just hit a record of over US$16 billion, helping the department’s cash flows.

Barclays plc warned that the court ruling will bring forward the date by when the Treasury will have exhausted its cash and extraordinary measures. That in turn builds pressure on Republicans to get the tax bill done, as it includes an increase in the debt limit.

Average tariff

“The fiscal outlook just got a lot worse as a result of this court ruling,” said Ernie Tedeschi, who is director of economics at Yale University’s Budget Lab and a former Biden administration official. “Very high tariffs just got less likely.”

The Budget Lab also estimated revenues would be about US$2 trillion lower over 10 years — roughly US$700 billion compared with US$2.7 trillion — if the court ruling stands, and current tariff levels remain in place.

Wednesday’s court ruling involved Trump’s use of the International Emergency Economic Powers Act (IEEPA) to threaten the highest tariff rates in more than a century. The April 2 “Liberation Day” tariffs involved a universal baseline levy of 10% plus much bigger rates for various trading partners — though Trump had put those on pause prior to the ruling. Bloomberg Economics estimated that the average US tariff rate got as high as nearly 27% at one point. The court ruling takes it below 6%.

Other channels Trump has to impose tariffs include Section 232 authority to impose sectoral levies. The administration has already invoked it to set the stage for import taxes on items including smartphones and jet engines. Pharmaceuticals, semiconductors, lumber and other products are also being eyed for tariffs. Existing duties are in place on steel and autos, among others.

“There are other avenues to do the tariffs,” said Stephanie Roth, chief economist at Wolfe Research, who sees a US$180 billion annual revenue hit from the court ruling.

Economists at Citi, Goldman Sachs and Morgan Stanley expect the administration will ultimately raise the tariff revenue it needs.

Estimates contested

White House Council of Economic Advisers Chair Stephen Miran on May 27 told Bloomberg Television the tariffs would take in hundreds of billions of dollars a year, helping alleviate concerns about the fiscal deficit.

Those estimates have bolstered the Trump administration against charges that its tax bill blows a hole in the budget.

“The blatantly wrong claim that the one, big beautiful bill increases the deficit is based on the Congressional Budget Office and other scorekeepers who use shoddy assumptions,” White House Press Secretary Karoline Leavitt told reporters Thursday. They have “historically been terrible at forecasting,” she said.

After the House passed a version of the tax bill earlier this month, it’s now in the Senate’s hands. It’s possible that Senate Republicans could propose adding tariffs in the multi-trillion dollar spending bill to help offset costs, though it’s unclear it would garner enough support to pass.

“They might include trying to get some tariffs,” said Alex Durante, senior economist at the Tax Foundation. “But I really don’t see the appetite for something as broad as what the president has done.”

Trump in a Truth Social post Thursday evening blasted the option, saying, “In other words, hundreds of politicians would sit around DC for weeks, and even months, trying to come to a conclusion as to what to charge other countries that are treating us unfairly.”

Source: Theedgemarkets

Universities around the world are seeking to offer refuge for students impacted by U.S. President Donald Trump's crackdown on academic institutions, targeting top talent and a slice of the billions of dollars in academic revenue in the United States.

Osaka University, one of the top ranked in Japan, is offering tuition fee waivers, research grants and help with travel arrangements for students and researchers at U.S. institutions who want to transfer.

Japan's Kyoto University and Tokyo University are also considering similar schemes, while Hong Kong has instructed its universities to attract top talent from the United States. China's Xi’an Jiaotong University has appealed for students at Harvard, singled out in Trump's crackdown, promising "streamlined" admissions and "comprehensive" support.

Trump's administration has enacted massive funding cuts for academic research, curbed visas for foreign students - especially those from China - and plans to hike taxes on elite schools.

Trump alleges top U.S. universities are cradles of anti-American movements. In a dramatic escalation, his administration last week revoked Harvard's ability to enrol foreign students, a move later blocked by a federal judge.

Masaru Ishii, dean of the graduate school of medicine at Osaka University, described the impact on U.S. universities as "a loss for all of humanity".

Japan aims to ramp up its number of foreign students to 400,000 over the next decade, from around 337,000 currently.

Jessica Turner, CEO of Quacquarelli Symonds, a London-based analytics firm that ranks universities globally, said other leading universities around the world were trying to attract students unsure of going to the United States.

Germany, France and Ireland are emerging as particularly attractive alternatives in Europe, she said, while in the Asia-Pacific, New Zealand, Singapore, Hong Kong, South Korea, Japan, and mainland China are rising in profile.

SWITCHING SCHOOLS

Chinese students have been particularly targeted in Trump's crackdown, with U.S. Secretary of State Marco Rubio on Wednesday pledging to "aggressively" crack down on their visas.

More than 275,000 Chinese students are enrolled in hundreds of U.S. colleges, providing a major source of revenue for the schools and a crucial pipeline of talent for U.S. technology companies.

International students - 54% of them from India and China - contributed more than $50 billion to the U.S. economy in 2023, according to the U.S. Department of Commerce.

Trump's crackdown comes at a critical period in the international student application process, as many young people prepare to travel to the U.S. in August to find accommodation and settle in before term starts.

Dai, 25, a Chinese student based in Chengdu, had planned to head to the U.S. to complete her master's but is now seriously considering taking up an offer in Britain instead.

"The various policies (by the U.S. government) were a slap in my face," she said, requesting to be identified only by her surname for privacy reasons. "I'm thinking about my mental health and it’s possible that I indeed change schools."

Students from Britain and the European Union are also now more hesitant to apply to U.S. universities, said Tom Moon, deputy head of consultancy at Oxbridge Applications, which helps students in their university applications.

He said many international students currently enrolled at U.S. universities were now contacting the consultancy to discuss transfer options to Canada, the UK and Europe.

According to a survey the consultancy ran earlier this week, 54% of its clients said they were now "less likely" to enrol at an American university than they were at the start of the year.

There has been an uptick in applications to British universities from prospective students in the U.S., said Universities UK, an organisation that promotes British institutions. It cautioned, however, that it was too early to say whether that translates into more students enrolling.

REPUTATIONAL EFFECTS

Ella Ricketts, an 18-year-old first year student at Harvard from Canada, said she receives a generous aid package paid for by the school's donors and is concerned that she won't be able to afford other options if forced to transfer.

"Around the time I was applying to schools, the only university across the Atlantic I considered was Oxford... However, I realised that I would not be able to afford the international tuition and there was no sufficient scholarship or financial aid available," she said.

If Harvard's ability to enrol foreign students is revoked, she would most likely apply to the University of Toronto, she said.

Analytics firm QS said overall visits to its 'Study in America' online guide have declined by 17.6% in the last year — with interest from India alone down over 50%.

"Measurable impacts on enrolment typically emerge within six to 18 months. Reputational effects, however, often linger far longer, particularly where visa uncertainty and shifting work rights play into perceptions of risk versus return," said QS' Turner.

That reputational risk, and the ensuing brain drain, could be even more damaging for U.S. institutions than the immediate economic hit from students leaving.

"If America turns these brilliant and talented students away, they will find other places to work and study," said Caleb Thompson, a 20-year-old U.S. student at Harvard, who lives with eight international scholars.

Source: TradingView

Italy Struggles with Brain Drain and Shrinking Workforce Amid Economic Pressures

Rising Emigration of Young, Highly Educated Italians

Economic Factors Driving Youth Emigration

The Importance of Attracting Foreign Labor

Source: FT

India's economy expanded at a faster-than-expected annual rate of 7.4% in the quarter ended March, despite the growing uncertainty in the global economy.

The gross domestic product in the first three months of 2025, or the fourth quarter of the government's fiscal year 2025, was sharply higher than the 6.7% growth forecast by economists in a Reuters poll.

That marked the strongest quarterly growth in the fiscal year of 2025, accelerating from a 6.2% expansion in the previous quarter, according to government data released Friday.

For the full fiscal year of 2025, India's economy expanded by 6.5%, in line with the government's February estimate.

Growth outlook in Asia's third-largest economy has remained relatively robust, thanks to strong domestic consumption and relatively lower dependence on exports, cushioning the blow from U.S. President Donald Trump's erratic trade policy.

Trump last month slapped tariffs of 26% on goods imported from India as part of his "reciprocal" duties on over 180 countries, only to put them on a 90-day pause days, allowing nations, including India, to negotiate deals with the U.S. A 10% base tariff continues to apply during the pause.

India currently runs a nearly $46 billion surplus with the U.S., according to government data.

New Delhi is seen by some as the next in line to clinch a deal with the U.S., following its agreements with China and the U.K. Trump reportedly said earlier this month that India had offered zero tariffs on all U.S. imports.

The Reserve Bank of India cut interest rates last month for a second consecutive time to 6% and shifted its policy stance to accommodative in a bid to bolster growth. The central bank is expected to deliver another rate cut in June.

"Falling inflation, downside risks to growth to prompt another cut to repo rate next week, said Shilan Shah, deputy chief emerging markets economist at Capital Economics, forecasting the repo rate will fall to 5.5% in the current easing cycle.

The ceasefire in Kashmir is "fragile and tensions could easily build again," which in turn may hold back investment and consumption, added Shah. Tensions between India and Pakistan boiled over earlier this month leading to military actions between the two nuclear-armed neighbors.

That said, India's growth story could still hold, in part helped by the improving consumer demand in rural areas. Consumption contributed over half of India's economy, with rural areas accounting for nearly 40% of overall consumer goods sales in the first quarter of 2025, data from market research firm NielsenIQ showed.

International Monetary Fund projects India's economy to reach $4.187 trillion in 2025, modestly overtaking Japan's $4.186 trillion, making it the world's fourth-largest economy.

"India was always going to overtake Japan – and also Germany – given its positive demographics and scope for continued productivity gains," said Shah, adding that "it isn't a stretch to think that, by 2040, India's economy could be the size of Germany's and Japan's [economy] combined."

Source: CNBC

Germany’s Gold Reserves at the Fed Under Scrutiny Amid Trump’s Return

Political Tensions and the Question of Trust in the Fed

Repatriation and Strategic Distribution of Gold Reserves

Federal Reserve’s Role and Future Considerations

Source: Reuters