It’s a dicey matter to play ‘chicken’ in markets

When threatened, birds puff up their feathers to appear larger than they actually are, and squawk to signal aggression.

On Friday, U.S. President Donald Trump suggested he would no longer be “Mr. NICE GUY” to China after the country “totally violated” its trade agreement with America. The same day, Trump said he would raise tariffs on steel imports to 50% from 25%.

The escalations follow a détente in May, during which Trump reached a trade deal with the U.K., agreed with Beijing to sharply reduce reciprocal import duties and delayed for more than a month a tariff of 50% on the European Union — two days after announcing it.

Those glad tidings lifted stocks. For May, the S&P 500 rose 6.2% and the Nasdaq Composite jumped 9.6%, with both indexes enjoying their best month since November 2023. The Dow Jones Industrial Average gained 3.9% for the month.

But the mood among investors might change quickly, depending on communication coming from the White House.

The word “chicken” is used as a metaphor for cowardice. In reality, they can be dangerous — there have been reports of humans being killed by Colonel Sanders’ favorite bird.

Asia markets start June in the red
U.S. markets traded mixed Friday. The S&P 500 was flat, the Dow Jones Industrial Average rose 0.13% and the Nasdaq Composite fell 0.32%. Futures tied to the three indexes ticked down Sunday evening stateside. Asia-Pacific stocks fell Monday. Hong Kong’s Hang Seng index dropped 1.9% and Japan’s Nikkei 225 lost 1.32% at 1:30 p.m. Singapore time.

Expected Trump-Xi talk
Trade tensions between China and the U.S. are escalating. On Monday, Beijing claimed that the White House’s “export control measures” breach the two countries’ agreement reached in Geneva, Switzerland, refuting Trump’s claim on Friday that China has “TOTALLY VIOLATED” it. That said, reconciliation could happen as Trump and Chinese President Xi Jinping are expected to discuss trade negotiations “this week,” U.S. National Economic Council director Kevin Hassett said on Sunday.

Trump says he’ll double steel tariffs
Trump on Friday told steelworkers at U.S. Steel that he will raise import duties on steel to 50% from 25%. The new import duties will start June 4, the president posted on Truth Social. On Saturday, the European Union said it is “prepared to impose countermeasures, including in response to the latest U.S. tariff increase.” Even so, “tariffs are not going away,” U.S. Commerce Secretary Howard Lutnick said on “Fox News Sunday.”

Musk cuts himself from DOGE
Elon Musk bid farewell to his role at the U.S. Department of Government Efficiency Friday. Musk said on Sunday that he doesn’t want to “take responsibility for everything the administration’s doing,” expressing disappointment at the White House’s “massive spending bill.” Tesla shares lost 14% this year amid Musk’s involvement in politics, but gained 22% in May following Musk’s April statement he would spend less time at DOGE.

Australia’s Soul Patts and Brickworks to merge
Shares of Australian investment firm Washington H. Soul Pattinson, also known as Soul Patts, spiked more than 15%, and its affiliate Brickworks rocketed over 25% after both companies announced a merger of 14 billion Australian dollars ($9 billion). As part of the deal, a new company listed in Sydney will acquire all outstanding shares of Soul Patts and Brickworks. The merged entity will have holdings across real estate, private equity and credit totaling A$13.1 billion.

[PRO] May jobs report in focus
The U.S. nonfarm payrolls report for May, out Friday, will provide more information on how the economy is holding up amid Trump’s multiple tariffs —and play a big role in determining whether the May rally in stocks still has legs. Economists expect the number of jobs added in May to dip from April. It misses the forecast, markets could take a downturn as the White House appears to ratchet up its tariff rhetoric.

Investors are piling into big, short Treasury bets alongside Warren Buffett

Investors always pay close attention to bonds, and what the latest movement in prices and yields is saying about the economy. Right now, the action is telling investors to stick to the shorter-end of the fixed-income market with their maturities.

Long-term treasuries and long-term corporate bonds have posted negative performance since September, which is very rare, said Todd Sohn, senior ETF and technical strategist at Strategas Securities, on “ETF Edge.”

The only other time that’s happened in modern times was during the Financial Crisis,” he added. “It is hard to argue against short-term duration bonds right now.” 

It would seem that Warren Buffett agrees, with Berkshire Hathaway doubling its ownership of T-bills and now owning 5% of all short-term Treasuries, according to a recent JPMorgan report.