The Great Repression

US equities closed higher on Friday, with the NASDAQ and S&P500 resetting record highs, as markets extended the risk rally sparked by the Israel-Iran ceasefire. The S&P500 is now up almost 5% for the year, after being flat year-to-date as recently as the final week of May. However, not all news is positive, as the third read of US Q1 GDP saw growth revised down from -0.2% to -0.5%, largely due to surging imports and lower consumer spending. The GDP price index and core PCE price index were revised higher, but the overall impression is of an economy losing steam. Donald Trump has been critical of Fed Chair Powell, blaming him for the economic slowdown and suggesting that he may announce a successor soon. Trump's comments have raised concerns about central bank independence and the potential for financial repression. The Congressional Budget Office has estimated that the Senate-approved version of the One Big Beautiful Bill Act will add $3.3 trillion to cumulative US deficits over the next 10 years. With an economy starting to slide and financing pressures everywhere, Trump is keen to bring interest rates under executive control, which could lead to a new era of financial repression. The theme of financial repression is not unique to the US, as examples can be seen in other countries, such as China, where it has been adopted as policy for years, and the trend may continue as globalized capital markets are reevaluated in a more nationalist and realist image.