The Watch Dog – Home and Abroad
Scott B. MacDonald, Ph.D. - Smith’s Research & Gradings – September 8, 2025
Summary: Mr. Market will have plenty to consider during the upcoming week. Inflation data will dominate in the run-up to the September 16-17th FOMC meeting, while there is drama to be had over the legitimacy of Trump’s tariffs (though we expect them to stick). Meanwhile Trump has unleashed ICE raids on Boston and is still talking tough on sending the National Guard to Chicago. The geopolitical front is full – France’s government heads into a no confidence vote, Japan’s prime minister is stepping down, Russia continues to launch massive attacks on Ukraine, Venezuela looms large as a hotspot, and South Korea is shocked at the arrest of its nationals at a Hyundai plant in Georgia, one of the largest in the US.
At Home Headlines
Inflation focus as September Fed meeting nears. The Fed meets on September 16th-17th and the odds of the US central bank cutting rates stand at 100%. Upcoming data includes consumer credit (Monday), producer price index and PPI (Wednesday), CPI and initial jobless claims (Thursday), and consumer sentiment (Friday). Data most likely will continue to show sticky inflation, but the softening of labor markets is likely to be more pronounced. Also worth watching are earnings calls from Oracle, Adobe and Kroger. The last, a major grocery store chain, will have considerable scrutiny due to its sensitivity to consumer sentiment.
US Treasury secretary denies Trump tariffs are tax on Americans. On an interview on NBC US Treasury Secretary Scott Bessent dismissed concerns from American corporations, such as John Deere, Nike and Target which have stated that Trump’s tariffs will cost them billions of dollars annually and that they are passing costs on to the consumer. It also flies in the face of the US Chamber of Commerce, which estimates that tariffs could cost American small businesses $202 billion annually. Beyond tariffs, Bessent asserted that the Supreme Court is likely to vote in favor of the legality of the Trump’s administration’s approach to tariffs. He also noted of the manufacturing sector, which has struggled through 2025: “by the fourth quarter, we’re going to see a substantial acceleration.” Let’s hope he is right.
Americans face biggest increase in health insurance costs in 15 years. US health insurers are raising insurance premiums by the most in 15 years. UnitedHealth has cited tariffs from Trump’s trade wars as the main reason (not sure how that works). According to Mercer, a financial services company, the cost of health insurance plans for employees is expected to surge by an average of 6.5% in 2026. For people who purchase health insurance on government exchanges, the median increase for 2026 is 18%, more than double last year’s 7% increase. Best advice – stay healthy.
Dollar stores draw in more shoppers making six figures as Americans across income levels look to save. Sales at both Dollar Tree and Dollar General rose in Q3, driven by higher-income shoppers shifting their spending to lower-cost alternatives. Higher costs related to tariffs are forcing people to look for bargains.
Detroit’s carmakers to save billions in Trump emissions rollback. Trump’s deregulatory push, which includes rolling back those pesky emissions standards, is likely to be a multibillion dollar gift to US automakers. General Motors has already stated it would cut EV production plans at two factories and is overhauling a third plant to make gas-fueled pickups, instead of battery-powered trucks. Ford Motor is moving funds from a canceled three-row electric SUV to future internal combustion engine vehicles and hybrids, while Jeep-owner Stellantis NV is resurrecting the thirsty Hemi V-8 engine. Got gas?
Abroad Headlines
Ishiba to quit as prime minister amid LDP discontent. Over the weekend Japan’s Prime Minister Shigeru Ishiba announced that he will resign due to the ruling Liberal Democratic Party’s (LDP) poor showing in recent elections. The LDP is badly divided and rules as a minority government in parliament. The next LDP head and prime minister will need the support of other parties in the Diet to remain in office, which raises questions over political stability in the short term. Better news on the trade front: Trump signed an executive order that cuts tariffs on Japanese car imports from 27.5% to 15%, easing uncertainty for Honda, Nissan and Toyota. Tokyo also agreed to invest $550 billion in US projects and gradually open its economy to US goods, including cars and rice.
France looks into the abyss. On Monday, Prime Minister Francois Bayrou is putting his short-lived administration to the vote as he faces considerable opposition to his austerity budget from both the far right and far left. Although President Macron will remain in office the possibility of France having its fifth prime minister in less than two years is likely to roil European markets. The economy is not in good shape, and the possibility of social unrest cannot be ruled out. To address France’s ballooning deficits (estimated at close to 6% of GDP) Bayrou had the audacity of proposing a budget that makes major cuts in spending, including dropping two of the country’s annual public holidays. For a country addicted to holidays, the angry mobs want the Prime Minister’s head. Look for a bad week for French bonds.
Who cut the cables? On Saturday Microsoft stated that clients of its Azure cloud platform might experience latency due to the cutting of multiple undersea cables in the Red Sea. The company noted that traffic through the Middle East or ending in Aisa or Europe had been affected. Who did it? Microsoft did not state who cut the cables or why. Although the problem was quickly addressed, it raises serious questions of cable vulnerability, especially in the case of war. Undersea cables were damaged in December 2024 in the Gulf of Finland. Finnish authorities accused a Cook Islands-registered oil tanker, regarded as part of Russia’s shadow fleet of tankers, as the culprit.
US migrant raid jolts South Korea, stirs investor anxiety. Last week federal agents detained 475 people at Hyundai’s $7.6 billion manufacturing complex in Georgia. This was the largest single-site enforcement operation in the history of the Department of Homeland Security. The majority of those detained were Korean nationals. Homeland Security stated: “This operation underscores our commitment to protecting jobs for businesses that comply with the law, safeguarding the integrity of our economy, and protecting workers from exploitation.” The federal move brought construction to a halt at HL-GA Battery Co., a joint venture between Hyundai and LG Energy Solution, which is to supply Hyundai’s new EV-production hub. Hyundai is one of the most prominent foreign investors in US manufacturing. In March, the company vowed to spend another $21 billion in the US, including an expansion of the Georgia plant. Moreover, South Korea’s President Lee Jae Myung met with Trump two weeks earlier and promised a $350 billion fund to help Korean companies invest in the US, with $150 billion dedicated to the shipbuilding industry. The raid jolted Korea and raised big questions on the value of investing in the US. In the Chosun Ilbo, Korea’s most circulated paper, Kim Tae-Hyung, a professor and chair of the political science department at Soongsil University noted: “It feels like a stab in the back. Most Koreans can’t help but feel infuriated and Korean companies will inevitably be discouraged from proceeding with investment plans in the US.”
US tensions with Venezuela mount. For anyone that missed it, the US sank an alleged narcotrafficking ship offshore of Venezuela. This kicked off a debate over whether the eight US ships represent a possible US gambit to topple Venezuela’s strongman Nicolás Maduro from power. While the buildup has a faint echo of Operation Urgent Fury that ousted the Panama’s narco-dictator Manuel Noriega in 1989, US forces currently available would probably be inadequate to the task, without help from inside the Venezuelan armed forces. However, the US position in the Caribbean and Latin America is much more muscular than during the Biden administration. RealClear Politics White House correspondent Philip Wegmann caught the mood: “…I think that this is the updated Monroe Doctrine. The White House feels that it is our hemisphere and they’re going to be going after these cartels not through the legal system but through the US military. It sends a deterrent not just to the Maduro regime but also some of our wayward allies, saying, look, you don’t want Seal Team 6 in your backyard.” While this has some appeal in the US as it is being cast as a law-and-order issue, in the region it is seen by many as a return of gunboat diplomacy with Washington telling Caribbean and Latin American governments what to do – or else. Taken together with the tariffs, the US is not making friends and making China look better.
