Thankfully, it’s all part of the plan.
That joke’s not going to get old, and even if it does, I’m going to keep using it. So, steel yourselves.
Whatever happens to US equities this week, it was notable that futures were off sharply ahead of Monday’s cash session due in part to Donald Trump’s weekend interview with Maria Bartiromo, who asked if The White House is concerned about a recession and a stock pullback in connection with policy uncertainty, particularly around trade.
Trump’s answer was ridiculous not so much because it wouldn’t be a rational thing to say for anyone else, but rather because coming from Trump, it sounded like a small child lecturing his parents on the health risks of candy and the many virtues of forbearance, self-restraint and prudence.
“Before you came into office the first time, a lot of people said, ‘Oh, this is the business president, he’s watching the stock market, he doesn’t want the market to go down,’ now we’ve got tariffs and the market has being going down–” Bartiromo said. “Well, not much,” Trump scoffed, “in all fairness.”
He could’ve, and should’ve maybe, left it at that. Because that was the right answer, and his demeanor was, despite himself, that of an adult. Yes, he’s seen the market, no it isn’t down much and no a 5% pullback on the S&P shouldn’t factor into a president’s agenda.
But Bartiromo didn’t let it go. Referencing Trump’s “disruption” comment from last week, she asked, “Is that what you meant? That the stock market going down was the ‘disruption?'”
At that point, Trump pretended he’s not paying any attention to the market, and proceeded to claim for himself the patience of a Chinese emperor. “You can’t really watch the stock market,” he said. “If you look at China, they take a 100-year view. We go by quarters, and you can’t go by that. You have to do what’s right.”
Again, there isn’t anything inherently wrong with that assertion but, i) it beggars belief that Trump’s truly willing to let the stock market fall materially if it means proving something to America’s trade partners about his threshold for pain in the pursuit of “correcting” trade imbalances, and more importantly ii) it’s the furthest thing from obvious that this — this stock pullback — is something Trump views as inevitable in the context of the trade war, and it’s even less obvious that it’s deliberate — that Trump’s trying to tank stocks — in an effort to somehow sacrifice wealthy households at the altar of a pro-Main Street agenda in the course of managing down 10-year yields and compelling the Fed to cut rates.
That latter point is the thesis floating around on Wall Street, and if it sounds like something someone on Wall Street might’ve reverse engineered to explain away something that’s far, far simpler, that’s because it is.
Is there a parallel universe in which a shrewd, strategic populist US president views the market fallout from the implementation of a protectionist trade agenda as a tool for curbing the excesses of wealthy households, and the accompanying slower growth impulse as a mechanism by which to both tamp down benchmark US yields, thereby lowering mortgage costs, and also compelling the Fed to cut, thereby helping to alleviate some of the burden for households which depend on variable-rate debt to make ends meet? Maybe. Is that this universe? No. Almost certainly not.
Investors are apprised of the long odds that Trump, a man who famously can’t sit through even the shortest daily intelligence briefings without losing the plot and blurting out, “Where da McMuffins at? Who got da McMuffins?!” is engaged in the kind of fairly demanding second-order thinking inherent in the plan sketched above.
Even if — let me add some emphasis: Even if — you attribute to Trump the sort of analytical faculties he’d need to hatch a plan that depends on second- and third-order thinking, and also the patience it takes to let such a plan unfold, any scheme that involves countenancing a stock market correction and a recession is a risky one. Even in the hands of a level-headed, even-keeled tactician, falling equity prices and a snowballing economic downturn are difficult to manage, and very hard to ignore in pursuit of some larger strategy, particularly when everyone’s screaming at you to stanch the bleeding.
So, if and when the shallow pullback on Wall Street morphs into a correction or, God forbid, a bear market, you can absolutely expect Trump to U-turn. A negative Q1 growth print might elicit a more nuanced response to the extent the administration can pretend it isn’t real, or that the data doesn’t accurately tally GDP and so on, but a slowdown that lasts longer than a few months would likewise force a rethink.
There’s surely something to the idea, as expounded late last week by JPMorgan, that if there’s going to be a “disruption” tied to tariffs and federal layoffs, it should come sooner rather than closer to the mid-terms. That’s self-evident. And it’s almost surely the case that Elon Musk has a larger plan in his head (although my guess is that plan looks a lot different than the plan Wall Street’s attributing to the administration as a whole). But if we’re talking strictly about Trump, I think it’s a mistake to believe there’s a roadmap, or if you’re determined that there is, a mistake to think he’ll stick to it come hell or high bear market.
Any way you look at, market participants will be forgiven for being wary. If Trump’s just flying by the seat of his pants, then hold on for dear life. If he’s lying, markets will test him by pushing the envelope until any selloff extension hits his pain threshold. In the unlikely event he’s telling the truth, and the administration does in fact view a stock selloff as a necessary evil or even as somehow desirable, well then look out below.
With all of that said, do you think is a buying opportunity?
I mean, I have a couple of accounts where I add broad index exposure on material pullbacks just as a matter of course. Not investment advice, but you kinda have to have something like that, somewhere. Doesn’t mean you have to buy every 2% dip, but generally speaking, a long-horizon, balanced portfolio is adding low-cost US equity index exposure once a selloff gets beyond, say, 7%. That doesn’t mean the same selloff won’t be 20% next week, but what you wanna do (again, not investment advice, consultant a financial advisor and all the other caveats) is dollar-cost average every month, and put in a little extra when things go south. Or at least in your core portfolio.
Investors can catch falling knives, even if they had further to fall. Traders juggle knives.
Poor people turn to crime to feed their families.
You can campaign the midterms on that.
Crapshoot on that one since labor elected you.
I’d be very curious to hear what Musk’s plan is. Initially, his net worth skyrocketed, but Tesla is now back to pre-election levels. I’d say Starlink will benefit from new US government contracts, but other countries are (or will be) looking for alternatives ASAP. Not sure when it comes to SpaceX, but maybe Elon is less interested in being the first trillionaire than putting someone on Mars?
All that to say I think it’s fair to question whether the drugs are starting to impair Elon’s judgment and whether or not he has a plan or if he also just has concepts of a plan.
I won’t be surprised if Musk and Trump start butting heads more directly as things keep going south. If Trump has learned anything over the years, it’s that you have to have a fall guy.
Musk currently has Trump painted in a corner.
Musk is the current scapegoat of the administration. When the chickens finally come home to roost about how every single thing he’s done is illegal, Trump will claim ignorance and throw Elon under the bus.
Musk has himself painted into a corner since he is absolutely killing his moderate and liberal buying base who aren’t going to want anything to do with wherever this plan is going…
Maybe whatever delusions Trump is suffering from are proving to be contagious, neither from inhalation nor casual contact, but simply by becoming aware of them. Any Wall Streeter or red-dyed in the wool MAGAt who wants to tell me there is a plan and it’s so 4D only Trump can understand it has to first explain one thing. How can this man pull a “minerals for peace” deal out of his ass and go on and on about it in front of the world press repeatedly calling them “raw earths” – themselves one of the many things that Trump loves to declare that “no one’s ever heard before?” Normally, that is because such things emanate from the thin air between his good ear and his recently nicked one, but in this case it is because there is actually no such thing. And anyone involved in the mineral biz and most consumers of (or investors in) high tech are familiar with the actual term – rare earths – if not their components. Still, few seemed to mention it, let alone care about, this notable lack of precision.
Maybe precision’s already out the window since names and terms don’t matter, as we now plan our winter trips to the Gulf formerly known as Mexico. But even if Trump started talking about consumer price inflammation or the Dow James Index, be assured that he is a brilliant surgeon who just can’t seem to get the shower to turn on or the toilet to flush.
Usually its explained with the “joke” response. Oh he was just joking, such a funny guy, don’t you constantly hear him cracking people up at his rallys. The man should be in stand up!
I’m not confident Trump could stop the bleeding even if he wanted to. My Canadian friends are pissed and seem determined to show us they can fight back by embargoing us. I imagine the Europeans are feeling the same way. I don’t see them just getting friendly again if the tariff war ends. I don’t know enough to know how much that will impact us overall, but surely it will be felt.
I don’t think Trump can just drop tariffs and go whimpering to sit in the corner while the whole world laughs their heads off. I think he’s painted himself into the corner. I mean, what is his big economic plan to MAGA without tariffs? Tariffs have been his answer to everything, pretty much, and his cadre of yes-men are telling him it’s all going to work, just tell the no pain no gain story and string up a few transsexual and immigrants to distract the newscycle.
From Good Omens,
Aziraphale: Best not to speculate. It’s all part of the Great Plan. It’s not for us to understand. It’s ineffable.
Crowley: The Great Plan’s ineffable?
Aziraphale: Exactly. It is beyond understanding and incapable of being put into words.
…
Say what you will, Trump’s Plan is definitely ineffable.
I’m still chewing on the gristle that is the concepts of a plan — gimme another say, two weeks.
I am chewing on wood hatching a plan as we speak.
I’m not sure Trump has a plan for the economy, but I definitely think he has an outlook/expectation, and that is he is the emperor, or on a humble day maybe not yet, but only because he isn’t acting the part yet well enough. Certainly he believes that he could act more the part, hence the comment about 100 year outlooks, affections constantly oriented towards the set of all rulers for life, rulers of the singular type that don’t retire, maybe die, but that’s it for leaving. Since he’s a shy guy, really, this ‘acting more the part’ usually follows the path of little jokes – joking as seeds of normalcy – comments about running for 3rd terms, or perhaps no elections necessary since they simply reflect how slimy his adversaries – these are funny at first, (they’re jokes after all) but then become so serious there is no backing down.
Blurting out “Who got da McMuffins…?”
…thanks, H., …may have been the best laugh I’ve had since the fateful Election Day…
…I so appreciate that momentary relief…