White House moves on data echo emerging markets
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Illustration: Sarah Grillo/Axios
Investors in emerging markets that have leaders who cast doubt on national economic data may have lessons for American traders, as President Trump continues to dispute official statistics.
Why it matters: The U.S. is by no means an emerging market or dictatorship. But looking at how markets around the world perform under authoritarian leadership holds some important lessons for domestic investors.
Catch up quick: Trump has made several recent moves.
- Fired the head of the Bureau of Labor Statistics.
- Pressured Federal Reserve chair Jerome Powell to lower interest rates.
- Cut a deal to take a portion of revenue from two major American chip companies selling semiconductors to China.
- Called on Goldman Sachs to fire its head economist, after the institution predicted, alongside most of Wall Street, that tariffs would drive inflation and slow growth.
- Created a scorecard that rates companies and trade associations on how hard they worked to support and promote the "One Big Beautiful Bill," a senior White House official tells Axios' Mike Allen.
State of play: "In emerging markets whenever we see the administration trying to dictate monetary policy it's almost always received extremely poorly," says Jason Hsu, founder of Rayliant Global Advisors, where he focuses on emerging markets.
- The MSCI Emerging Markets Index is up over 20% year-to-date compared with the 10% year-to-date gains of the S&P 500.
- Emerging markets with authoritarian leaders can still have strong stock market performance Fabio Natalucci, CEO of the Andersen Institute for Finance and Economics and a former deputy director of the International Monetary Fund, tells Axios.
- What matters are the specific policies of each leader, how they affect the independence of the central bank, and the integrity of economic data.
Between the lines: Highly centralized leadership in emerging markets tends to come with a weak local currency, high inflation and slowing growth.
- In Turkey, the head of the central bank has been dismissed a number of times, which has led to a crash of the Turkish currency.
- In China, doubts over economic data have forced investors to rely on alternate sources, including shipping volumes and satellite images.
Zoom in: The risk in this particular moment is that Fed independence is under pressure while the full potential impact of tariffs has not been felt yet, which could leave monetary policy "really behind the curve," Natalucci says.
- The U.S. is "thriving because it's an open economy. It's a rules-based economy," he adds. If the rules are rewritten, it could be a catalyst for investors to continue moving away from dollar-denominated assets.
Yes, but: Not only is the U.S. not an emerging market, but American leadership still has the kind of credibility that emerging markets leaders often lack, Hsu notes.
- Trump has "a lot of willing believers," including market participants who felt economic data gathering needed reforms to make it more accurate.
What we're watching: "The market will price (any) policy mistake," Natalucci says. The bond market has been relatively stable since April.
- But if the Fed were to cut rates amid hot inflation, bond investors could react negatively, pushing up yields and making debt more expensive.
- And that could put pressure on the administration, which has already proven that it reacts when the bond market panics.
The White House responded to an Axios request for comment on these parallels via email.
- "There is no virtue in defending a broken status quo and upholding elite-approved America Last policies that have eroded our industrial base and decimated American communities," White House spokesman Kush Desai writes, pointing to efforts to lower inflation and strike trade deals.
- "Ivory tower analyses that are completely disconnected from day-to-day reality for working class Americans aren't going to change these facts."
