Donald Trump tried to warn you: “You can’t look at the stock market.”
It’s like Medusa: If you look at it, it’ll scare you to death and turn you to stone.
Trump, perhaps sensing he had a problem on his hands after US equities failed to respond last week to another tariff delay, gently suggested over the weekend that Americans do what he couldn’t during his first term: Look past near-term fluctuations in stock prices.
Consider China, Trump advised, during an interview with Maria Bartiromo. Beijing takes a “100-year view” when crafting policy. The US, he intimated, might do the same.
Sage advice. Because another few sessions like Monday’s and it’ll take 100 years for investors to recoup the losses in their equity portfolios. I’m just kidding. It wasn’t that bad. But it was bad. 5% or so bad on the Nasdaq 100 at one juncture. “Make bulls bears again.” “MBBA.” Pronounced: “Mmmmmbah.”
Monday was among the worst sessions for big US tech since the pandemic crash. Tesla’s down more than 50% from the December highs, Nvidia’s off 30%, Meta’s on the brink of a bear market, the SOX too.
SocGen’s equity strategy team described “aggressive de-risking” in the Nasdaq 100, where a lot of that ultra-crowded, AI thematic positioning lives. There’s no mystery as to the catalyst for the tumult: In the Oval Office sits the living, breathing manifestation of volatility.
Trump’s mercurial machinations are conceptually similar to “introducing a sudden vol catalyst or tail surprise into a carry- or momentum- trade, where the prior accumulation of leveraged exposure was built on the edifice of low volatility, and as such, you get a forced stop-out unwind of legacy performance,” Nomura’s Charlie McElligott wrote Monday.
The figures above (click to enlarge, as always) give you a sense of the unwind, which is manifesting everywhere, from real money to the “pod people” to systematics to the leveraged ETF space where, in case you haven’t noticed, you’re getting that EOD rebalance flow in a “bigly” way during downdraft sessions.
Pretty much everywhere you look, there’s evidence of stress and recession worry. The VVIX was fist-clenching up at ~130 on Monday, two-year yields were 3.90% (so, ~two cuts rich to Fed funds), market pricing for 2025 Fed easing was ~83bps (so, three cuts fully priced with some chance of a fourth) and on and on.
Maybe this is, as team Trump suggests, just part of the plan — a little “disruption” on the path to a new American “golden age.” But it’d be a stretch to suggest the situation on Wall Street isn’t on the cusp of becoming a problem. At the very least, it’s awkward for a president who, no matter what he says when the market’s down, is more than happy to take credit when it’s up.
“To regain a semblance of market confidence as to where this is going, the Trump administration needs to find a way to collapse the timeline and pull-forward the ‘goods’ in order to shift the messaging and negative sentiment to the things the private sector will require to offset the downside of current headwinds,” McElligott went on. “But that is going to be a monster struggle.”
“pull forward the goods” – one thing I think Trump and Bessent and Lutnick aren’t thinking through is what those actual goods are. The thesis seems to be that Canada and China and others won’t be able to take the pain and will yield but there also is no plan on what “yielding” actually is or what goods it will create.
“Marco, I think the Canada invasion needs to be a next week thing rather than a Q4 thing.”
As a Canadian, that is definitely “funny, not funny”
Sitting in the Southern hemisphere, I’m a bit sketchy on the history of your Northern tribes up there, but didn’t Canada wack the US in the last war you guys fought?
or maybe, “Vipin, you need to find 2 more GDP percentage points …”
What trader doesn’t love Vol futures in backwardation?
H-Man, and I don’t see the monster struggle being achieved. At this point, a soft landing is rapidly disappearing in the rear view mirror. Probably time to buckle up and stick your head between your legs.
That and a barf bag.
Bud Fox: “Blue Horseshoe hates Tesla.”
I don’t know about you all, but I feel warm and cuddly all over hearing that the front row billionaire bros are down over 200 billion so far. What a bunch of horses asses. I bet they wish they had stayed in their lane.
If it wasn’t so sad it would make great TV.
Those billionaires are now between a rock and a hard place, like every coward that holds his nose and joins team Trump. The capo doesn’t take kindly to defectors.