Mostly agree with this*. Though wanted to ask, what is your theory behind why the markets have actually been up this week. A few theories but wondering if you agree:
- Too many traders still think this is all a bluff despite ample evidence to the contrary. So they are "buying the dip". In addition, the market is increasingly made up of re…
Mostly agree with this*. Though wanted to ask, what is your theory behind why the markets have actually been up this week. A few theories but wondering if you agree:
- Too many traders still think this is all a bluff despite ample evidence to the contrary. So they are "buying the dip". In addition, the market is increasingly made up of retail investors many of whom are Trump super fans who have drank the Trump Kool-Aid
- There is a base case that Trump will actually just reverse course and pivot away from tariffs. Given this is basically the one policy Trump has any consistent conviction on (see this clip from Oprah decades ago. https://www.youtube.com/shorts/i7z2tUePt8c Also likely one reason he was Democrat back in the day) I have my serious doubts (or doubts he will fully reverse course anyway). Plus, he's surrounded himself with sycophants in a way he didn't last time. However, Trump is also famously fickle and changes his mind all the time. And he cares A LOT about Wall Street thinks about him.
- The tariffs proposed are massive. As you noted, there is a big danger of recession given the massive increase costs if tariffs are implemented. Plus as you note, the wishy washy nature of Trump's "will or won't he" is a big hit to investment given business owners don't really know what to do. But because this tariff is big enough to cause recession it will perversely bring down inflation due to massive job losses and decrease in consumer spending. My case for this is the 10-year has actually climbed down last few months (also consumer spending lately has been completely propped up by top 10-20% of earners if WSJ is to be believed. Given market collapse, the attendant hit to "wealth effect" will slow down consumer spending at the top and bring down inflation (in theory))
- The economic impacts of tariffs won't happen overnight. Precisely because people still think Trump will backtrack, there hasn't been big prices increases quite yet, nor massive layoffs if business owners think Trump will back off. But give it another month or two and we could see a "tipping point" scenario where the bad impacts start happening all at once. So ignore strong job numbers that came out today; probably a "too soon to be impactful" situation.
What say you? Does any of what lay out make sense to you?
* While you're likely right I think would be a massive mistake for Democrats to sit on their hands and just wait for bad economic news to bolster their midterm changes. If nothing else, I do actually think we are the brink of constitutional crisis. There is to me a very danger to this country right now that warrants being more combative on the merits. Plus just purely on politics, if Joe Rogan's recent comments are anything to go by, it seems like swing voters are actually alarmed by stuff like Gestapo like snatching of innocent people off the streets*.
Based on S&P and Nasdaq futures, feel like bullet point 1 seems like the answer here.
The number of people of clinging to the "there are still adults in the room" mindset is depressing. Although that's perhaps why this "Signal" story took off. One it's hilarious and involves social media so perfect mix to get traction. But the other reason is maybe the dawning realization the adults in the room are not actually adults but people way in over their heads. Would have thought a cursory reading of Pete Hesgeth would have convinced enough people this man has no business running DoD, but I continually am astonished at delusional lies people can tell themselves.
Maybe that's the answer. No one, absolutely no one likes to admit they have been conned. Its embarrassing and humiliating. But its also why cons succeed.
I think the market anticipated the tariffs to be much more moderate and targeted to specific countries/sectors. 10% was swirling around, but ended up being the base rate and many more countries were involved for no discernable reason. I think there was also some sentiment that this could be a continued negotiation tactic that would be temporary and removed over the course of the next few months. Now there are more indications that he is very much committed to this "strategy" long term. Israel removing tariffs ahead of the announcement and still be subjected to a 17% penalty is pretty compelling proof that it doesn't really matter what concessions these countries make.
This moment has been kind of clarifying as to the "How could Trump win" conversation. It seems really clear that tons of people internalized the idea that a lot of the warnings about the dangers of Trump was hyperventilating from over zealous libs and never Trumpers.
So as Josh notes, 2016 happens, dire warnings occur, all sorts of lib freakout (including me) occurs, a lot of the worst warnings don't come to pass even though he says and does plenty of crazy stuff so lots of normies conclude that most of the worst stuff is dare I say "fake news".
Think it also kind of speaks highly of various cabinet members and advisors around Trump the first term because it turns out as bad as he was they really were preventing a lot of the worst stuff from happening behind the scenes.
I feel like a north star for me is John Bolton as almost an avatar of too many of his supporters and even maybe swing voters. It seems as though based on the numerous interviews he did on Fox pre 2018 that he totally bought the narrative that all of these warnings about Trump was lib exaggeration and even dare I say, "a witch hunt". And then he gets the White House and discovers it's even worse than Libs and Never Trumpers say it is.
I think to me it speaks to how much of Trump's success is downstream from Fox and right wing media's ability to set the narrative; even if there actual news numbers are low they clearly have an ability to sway public opinion through 2nd and 3rd order effects.
That’s fair, I forgot the precise wording, and I apologize! You did call him “broadly a conservative in good standing” and positively contrasted his nomination with RFK’s, which at the time I interpreted to mean that you thought he might do a better job. (I disagreed then and still do, but maybe you didn’t mean that.)
I said, in November, that he was more likely to be confirmed than RFK, because (unlike RFK) he was not ideologically crosswise with any key GOP constituencies. I was wrong as to RFK’s confirmation, but I never assessed that Hegseth was likely to perform well. In fact, I wrote “I don’t think Hegseth is well-qualified at all.” So, you’re disagreeing with something I never said or believed.
But also, in theory the markets are forward looking. Plus it's very clear leaks very quickly get to enough traders to start moving the market no matter who's President. And this Presidency is almost farcically leaky.
If you're right, this basically to me validates my theory that too many people just don't believe Trump will follow through despite ample evidence to the contrary.
Mostly agree with this*. Though wanted to ask, what is your theory behind why the markets have actually been up this week. A few theories but wondering if you agree:
- Too many traders still think this is all a bluff despite ample evidence to the contrary. So they are "buying the dip". In addition, the market is increasingly made up of retail investors many of whom are Trump super fans who have drank the Trump Kool-Aid
- There is a base case that Trump will actually just reverse course and pivot away from tariffs. Given this is basically the one policy Trump has any consistent conviction on (see this clip from Oprah decades ago. https://www.youtube.com/shorts/i7z2tUePt8c Also likely one reason he was Democrat back in the day) I have my serious doubts (or doubts he will fully reverse course anyway). Plus, he's surrounded himself with sycophants in a way he didn't last time. However, Trump is also famously fickle and changes his mind all the time. And he cares A LOT about Wall Street thinks about him.
- The tariffs proposed are massive. As you noted, there is a big danger of recession given the massive increase costs if tariffs are implemented. Plus as you note, the wishy washy nature of Trump's "will or won't he" is a big hit to investment given business owners don't really know what to do. But because this tariff is big enough to cause recession it will perversely bring down inflation due to massive job losses and decrease in consumer spending. My case for this is the 10-year has actually climbed down last few months (also consumer spending lately has been completely propped up by top 10-20% of earners if WSJ is to be believed. Given market collapse, the attendant hit to "wealth effect" will slow down consumer spending at the top and bring down inflation (in theory))
- The economic impacts of tariffs won't happen overnight. Precisely because people still think Trump will backtrack, there hasn't been big prices increases quite yet, nor massive layoffs if business owners think Trump will back off. But give it another month or two and we could see a "tipping point" scenario where the bad impacts start happening all at once. So ignore strong job numbers that came out today; probably a "too soon to be impactful" situation.
What say you? Does any of what lay out make sense to you?
* While you're likely right I think would be a massive mistake for Democrats to sit on their hands and just wait for bad economic news to bolster their midterm changes. If nothing else, I do actually think we are the brink of constitutional crisis. There is to me a very danger to this country right now that warrants being more combative on the merits. Plus just purely on politics, if Joe Rogan's recent comments are anything to go by, it seems like swing voters are actually alarmed by stuff like Gestapo like snatching of innocent people off the streets*.
Based on S&P and Nasdaq futures, feel like bullet point 1 seems like the answer here.
The number of people of clinging to the "there are still adults in the room" mindset is depressing. Although that's perhaps why this "Signal" story took off. One it's hilarious and involves social media so perfect mix to get traction. But the other reason is maybe the dawning realization the adults in the room are not actually adults but people way in over their heads. Would have thought a cursory reading of Pete Hesgeth would have convinced enough people this man has no business running DoD, but I continually am astonished at delusional lies people can tell themselves.
Maybe that's the answer. No one, absolutely no one likes to admit they have been conned. Its embarrassing and humiliating. But its also why cons succeed.
I think the market anticipated the tariffs to be much more moderate and targeted to specific countries/sectors. 10% was swirling around, but ended up being the base rate and many more countries were involved for no discernable reason. I think there was also some sentiment that this could be a continued negotiation tactic that would be temporary and removed over the course of the next few months. Now there are more indications that he is very much committed to this "strategy" long term. Israel removing tariffs ahead of the announcement and still be subjected to a 17% penalty is pretty compelling proof that it doesn't really matter what concessions these countries make.
This moment has been kind of clarifying as to the "How could Trump win" conversation. It seems really clear that tons of people internalized the idea that a lot of the warnings about the dangers of Trump was hyperventilating from over zealous libs and never Trumpers.
So as Josh notes, 2016 happens, dire warnings occur, all sorts of lib freakout (including me) occurs, a lot of the worst warnings don't come to pass even though he says and does plenty of crazy stuff so lots of normies conclude that most of the worst stuff is dare I say "fake news".
Think it also kind of speaks highly of various cabinet members and advisors around Trump the first term because it turns out as bad as he was they really were preventing a lot of the worst stuff from happening behind the scenes.
I feel like a north star for me is John Bolton as almost an avatar of too many of his supporters and even maybe swing voters. It seems as though based on the numerous interviews he did on Fox pre 2018 that he totally bought the narrative that all of these warnings about Trump was lib exaggeration and even dare I say, "a witch hunt". And then he gets the White House and discovers it's even worse than Libs and Never Trumpers say it is.
I think to me it speaks to how much of Trump's success is downstream from Fox and right wing media's ability to set the narrative; even if there actual news numbers are low they clearly have an ability to sway public opinion through 2nd and 3rd order effects.
No I didn’t.
That’s fair, I forgot the precise wording, and I apologize! You did call him “broadly a conservative in good standing” and positively contrasted his nomination with RFK’s, which at the time I interpreted to mean that you thought he might do a better job. (I disagreed then and still do, but maybe you didn’t mean that.)
I said, in November, that he was more likely to be confirmed than RFK, because (unlike RFK) he was not ideologically crosswise with any key GOP constituencies. I was wrong as to RFK’s confirmation, but I never assessed that Hegseth was likely to perform well. In fact, I wrote “I don’t think Hegseth is well-qualified at all.” So, you’re disagreeing with something I never said or believed.
There's a reason they're announcing their "Liberation Day" bullshit AFTER the markets close lolz.
I mean fair.
But also, in theory the markets are forward looking. Plus it's very clear leaks very quickly get to enough traders to start moving the market no matter who's President. And this Presidency is almost farcically leaky.
If you're right, this basically to me validates my theory that too many people just don't believe Trump will follow through despite ample evidence to the contrary.
Honestly, I guess we'll see in like 30 minutes.