“Way down among Brazilians / Coffee beans grow by the billions / So they’ve got to find those extra cups to fill / They’ve got an awful lot of coffee in Brazil.” – Frank Sinatra
Chart of the Day
Good morning!
Coffee consumption in the U.S. is at a 20-year high, with 67% of Americans drinking coffee daily and 75% drinking coffee at least once a week. That means that there’s a decent chance that you’re reading this newsletter while sipping a cup of the ol’ bean juice. As most know, almost all of our coffee is imported. The only significant coffee-growing region in the U.S. is in Hawaii, with its rich volcanic soil and perfect combination of sunshine, humidity, and mild evenings. But even if the state’s Kona coffee wasn’t so highly prized (and priced), it wouldn’t be enough for Americans – volume-wise, it accounts for less than 1% of what we drink. Kona coffee a premium item, not your everyday cup of Joe.
In the near-term, this has thus led to some real concern about how President Donald Trump’s tariffs could affect the price of what gets so many of us going in the morning. Yet even before Trump re-entered the Oval Office, coffee prices had been on the rise. On global commodity markets, Arabica coffee hit all-time highs of around $4.30 a pound by mid-February. Rising demand, including from countries that have not historically been known as coffee aficionados (China and India for example), accounts for part of this. Also playing a role are adverse weather conditions affecting the coffee harvest in major growing regions such as Vietnam and, with all due respect to Mr. Sinatra (see above), Brazil.
There is a case to be made that any tariff-related effect on consumer prices of goods like coffee will be, as Federal Reserve Chair Jerome Powell put it, “transitory”, but if tariffs won’t keep coffee prices elevated, a changing climate might.
Some are working on a solution to both problems by boosting domestic production. Efforts are being made to revive the coffee industry of Puerto Rico, where the island’s coffee was once so well-regarded it was known as the “the Coffee of Popes and Kings.” But risk takers are also hoping to produce coffee beans in parts of the U.S. recently made feasible due to climate change – to wit, areas that previously were not warm enough might now be. Areas under consideration include southern California and Florida, where nearby avocado and citrus trees (respectively) could facilitate coffee cultivation by providing needed shade and protection.
This is by no means a solution that will materialize any time soon, especially since newly planted coffee trees take three to four years to start producing coffee beans (seeds). Frinj Coffee, a passion project backed by the singer Jason Mraz, is currently selling whole beans grown around Santa Barbara, California, at an eyewatering $128/pound, making continental U.S. coffee cultivation very much a distant dream of a select few. Nevertheless, one thing is for certain: U.S. demand for coffee isn’t going away anytime soon, so why not seek a way to fulfill some of that demand at home?
Catch Up With Fundstrat
When we look at back at 2018, we see stocks recovered from tariff news and rallied strongly. One of the fuels we see in 2025 is the possibility of a sizable drop in the VIX across all future expirations.
TECHNICAL
As of the last two days, the entire downtrend from mid-February has been exceeded, and signs of Consumer Staples faltering last week proved to be an excellent early technical bullish sign for the prospects of U.S. equity markets trying to bottom out.
CRYPTO
Market reaction function arguably is improving, but in our view, not enough to warrant drastic changes to our near-term outlook. We saw some evidence yesterday to suggest that crypto markets might not have completely priced in the risks of tariffs, so we are inclined to think there is still downside risk should those tariffs be implemented.
News We’re Following
Breaking News
- London’s Heathrow Airport shut down after power-station fire, causing travel chaos SEM
Markets and economy
- Home sales rose 4.2% in February, beating expectations WSJ
- EU delays implementing first retaliatory tariffs on U.S. goods to middle of April CNBC
Business
- Boston Celtics sold for $6.1 billion, a record price for pro sports WSJ
- Nvidia CEO Huang says he was wrong about timeline for quantum, surprised his comments hurt stocks CNBC
- Darden Restaurants lifts sales with bigger footprint, popular dishes WSJ
- X sues Modi’s government over content removal in new India censorship fight REU
Politics
- Musk set to receive top-secret briefing on U.S. war plans for China WSJ
- Judge bars Musk’s DOGE team from Social Security records in scathing ruling CNBC
- Trump signs order seeking to abolish education department WSJ
- Trump to expand critical mineral output using wartime powers BBG
Overseas
- China to add cobalt, copper in boost to state metal reserves BBG
- Canada’s new prime minister Mark Carney expected to call April 28 snap election SEM
- UK issues travel warning for US HILL
Of Interest
- Zimbabwe sports minister elected first female Olympics president FT
| Overnight |
| S&P Futures -18
point(s) (-0.3%
) Overnight range: -28 to +12 point(s) |
| APAC |
| Nikkei -0.2%
Topix +0.29% China SHCOMP -1.29% Hang Seng -2.19% Korea +0.23% Singapore -0.1% Australia +0.16% India +0.63% Taiwan -0.75% |
| Europe |
| Stoxx 50 -0.76%
Stoxx 600 -0.74% FTSE 100 -0.46% DAX -1.0% CAC 40 -0.72% Italy -0.57% IBEX -0.27% |
| FX |
| Dollar Index (DXY) +0.18%
to 104.03 EUR/USD -0.2% to 1.0829 GBP/USD -0.22% to 1.2938 USD/JPY +0.43% to 149.42 USD/CNY +0.02% to 7.2508 USD/CNH +0.07% to 7.2575 USD/CHF +0.18% to 0.8835 USD/CAD +0.07% to 1.4335 AUD/USD -0.29% to 0.6285 |
| Crypto |
| BTC -0.46%
to 84116.32 ETH -0.53% to 1968.79 XRP -1.45% to 2.4094 Cardano -1.41% to 0.711 Solana -0.22% to 127.72 Avalanche -0.64% to 18.61 Dogecoin -1.12% to 0.1676 Chainlink -0.52% to 14.14 |
| Commodities and Others |
| VIX +2.88%
to 20.37 WTI Crude -0.45% to 67.95 Brent Crude -0.22% to 71.84 Nat Gas -1.21% to 3.93 RBOB Gas -0.45% to 2.181 Heating Oil -0.63% to 2.24 Gold -0.51% to 3029.33 Silver -1.76% to 33.0 Copper -0.75% to 5.047 |
| US Treasuries |
| 1M -1.3bps
to 4.2728% 3M -2.2bps to 4.2689% 6M -1.2bps to 4.2166% 12M -2.5bps to 4.0307% 2Y -2.0bps to 3.9438% 5Y -1.9bps to 3.9925% 7Y -1.6bps to 4.1089% 10Y -1.2bps to 4.2252% 20Y -0.6bps to 4.5798% 30Y -0.5bps to 4.5507% |
| UST Term Structure |
| 2Y-3
M Spread narrowed 3.6bps to -36.6
bps 10Y-2 Y Spread widened 0.8bps to 27.7 bps 30Y-10 Y Spread widened 0.8bps to 32.4 bps |
| Yesterday's Recap |
| SPX -0.22%
SPX Eq Wt -0.42% NASDAQ 100 -0.3% NASDAQ Comp -0.33% Russell Midcap -0.4% R2k -0.65% R1k Value -0.25% R1k Growth -0.22% R2k Value -0.51% R2k Growth -0.77% FANG+ -0.79% Semis -0.16% Software -0.41% Biotech -0.99% Regional Banks -0.68% SPX GICS1 Sorted: Utes +0.42% Energy +0.42% Fin +0.19% Healthcare +0.11% REITs -0.09% Cons Disc -0.19% SPX -0.22% Comm Srvcs -0.32% Indu -0.46% Tech -0.49% Cons Staples -0.52% Materials -0.62% |
| USD HY OaS |
| All Sectors +0.5bp
to 358bp All Sectors ex-Energy +0.1bp to 323bp Cons Disc +1.2bp to 347bp Indu +0.7bp to 265bp Tech +1.8bp to 362bp Comm Srvcs -0.2bp to 551bp Materials +0.1bp to 321bp Energy -0.0bp to 353bp Fin Snr +0.1bp to 304bp Fin Sub -2.9bp to 228bp Cons Staples -0.2bp to 232bp Healthcare +1.1bp to 370bp Utes -1.0bp to 245bp * |
| Date | Time | Description | Estimate | Last |
|---|---|---|---|---|
| 3/24 | 9:45AM | Mar P S&P Manu PMI | 51.8 | 52.7 |
| 3/24 | 9:45AM | Mar P S&P Srvcs PMI | 51.2 | 51.0 |
| 3/25 | 10AM | Mar Conf Board Sentiment | 94.0 | 98.3 |
| 3/25 | 10AM | Feb New Home Sales | 680.0 | 657.0 |
| 3/25 | 10AM | Feb New Home Sales m/m | 3.5 | -10.5 |
| 3/26 | 8:30AM | Feb P Durable Gds Orders | -0.7 | 3.2 |
| 3/27 | 8:30AM | 4Q T GDP QoQ | 2.4 | 2.3 |