I hope you like excitement. Because these are exciting times. If you’re an adrenaline junkie, these are the markets for you.
Often, exciting can be synonymous with dread. That’s one reason we subject ourselves to horror movies. The adrenaline’s fun.
It probably wouldn’t seem like it to today’s teenagers, desensitized as they are to gratuitous violence, but the opening sequence in the original Scream — with Drew Barrymore — was pretty scary in theaters way back when. It was also thrilling, which is to say exciting.
The post-“Liberation Day” trade on Wall Street was a lot like that. You’re settling in for movie night. The Jiffy Pop’s on the stove. You’re all set to relive the thrills and chills of the financial crisis by way of Margin Call, which you’re watching for the 85th time. Then you get a call from a blocked number. The voice sounds vaguely — suspiciously — familiar, but you can’t place it because the man on the other end’s using a voice modulator. “You like financial crises?” he asks, in a sinister tone. “What’s your favorite crisis?” 10 minutes later, your 401(k)’s filleted and hung bleeding from a tree in the backyard.
You probably noticed Thursday that all’s not well on Wall Street despite Donald Trump’s 90-day tariff “pause” on countries not called “Gina.” US equities were once again gripped by volatility as one of the most harrowing stretches for US markets in a century rolled on unabated.
The swings are, frankly, too absurd to be worth mentioning. What’s the point? The moves shown above (in the VIX) are just a caricature. You had the largest one-day point and percentage crush on record into Wednesday’s rally, and then, halfway through Thursday, the VIX was up 18ppt and 55% from Wednesday. Who knows where it’ll end up by EOD, let alone by the weekend.
These moves are so cartoonishly exaggerated that they’re almost devoid of meaning. The same’s true in stocks. Corporate America, in aggregate, was allegedly worth 10% more on Wednesday than it was on Tuesday, and then come lunchtime Thursday, it was worth 6% less than it was at 4 PM on Wednesday. These are your markets on tariffs.
As discussed on Wednesday afternoon in “Losing Everything,” nothing’s fixed, despite Trump’s Walter Sobchak act:
The Dude: Walter, you f-ck… you f-cked it up! You f-cked it up! Global trade was in our hands, man!
Walter: Nothing is f-cked here, Dude. Come on, you’re being very un-Dude. They’ll call back. These countries are a bunch of amateurs.
In fact, everything’s indeed more or less f-cked. That’s going to be the case in perpetuity. And on pretty much every front, from markets to geopolitics and back again.
I’m not exaggerating when I say these last several days will go down as one of the most spectacular strategic boondoggles in all of human history, and in any context. Trump has just done what I long feared he might: Given the world a real reason (as opposed to the laundry list of contrived rationales dreamed up by de-dollarization advocates) to doubt the sanctity of US Treasurys and to question the viability of the dollar as the world’s reserve currency.
“‘Impoverishment Day’ has more than lived up to [our] expectations,” Jefferies’ Christopher Wood wrote, using his snarky moniker for Trump’s April 2 tariff unveil. “[But] what has really caught [our] attention in recent days is the continuing weakness of the US dollar and, even more unusual, the back up in long-term Treasury yields at the same time as the US stock market has clearly been signaling rising concerns about a US recession.”
Those uncomfortable juxtapositions, Wood went on, “raise questions [about] the supposed ‘risk-free’ status of Treasury bonds and with it the US dollar’s status as the reserve currency of the world.” Scary stuff, no?
Note that the long bond couldn’t manage much of a rally Thursday despite a 2.7bps stop-through at auction and the highest non-dealers award of the year. The dollar, meanwhile, fell almost 2% on the heels of a dovish CPI release. Thursday was on track to see the second-largest one-day drop for the dollar in nearly a decade, depending on which index you use.
In a good Thursday note, Nomura’s Charlie McElligott explained the problem for stocks and risk sentiment more generally. “Outside of the mechanical reversal flows and local vol reset [from Trump’s] can-kicking capitulation, what’s really changed here?” he wondered. It was a rhetorical question. The answer’s “not a lot.”
According to Nomura’s econ team, the 90-day pause, when considered with the new 10% baseline levy and, of course, the 125% tariff on China, still nets to an average US tariff rate of 24%, down a mere 3ppt from the implied 27% rate had the “Liberation Day” tariffs gone into effect as planned. Remember: That rate was between 2% and 3% at the beginning of this year. So, we’re still staring at a 10-fold increase, which Charlie aptly described as “absolutely soul crushing.”
Plainly, corporate visibility didn’t improve on Wednesday. This is another point I made in the linked “Losing Everything” piece. If anything, Trump’s about-face only made things more indeterminate.
“It still seems to me that corporate capex decision making remains in this liminal state of nothingness [and that] equals more uncertainty and growth drag,” McElligott wrote, adding that now, markets and other countries know where the Trump put’s struck: Just south of 5000 SPX and/or just north of 4.50% on US 10s. After Wednesday, everyone knows what breaks him.
Given that, “why exactly would you offer much concession at negotiations?” Charlie went on, before asking, “Doesn’t that likely lead us to a place where we’re having this same freakout into the next deadline 89 days from now?” Trump, he concluded, “lost leverage yesterday.”
“Improvisation day” is a better moniker I think.
Something about the market testing Trump now that he blinked and something about wet card board.
Maybe I’m an idiot but looks like a good buying time for certain stocks. Another week of declines and there is a big pause on Gina’s tariffs as well.
H said it before; 54% tariffs or anything close to that is wholly unsustainable, so it just won’t happen (as in producers will keep their ships outside of port waiting to unload when this is over). Or ship it through other countries.
Question I do have is how they are going to stop the weakening of the dollar and get yields down. Bessent needs to go? I understand he said nothing unusual was happening today.
“KISS my ass” day
Whoever designs the eye-catching opening graphics for your opinion pieces has a great talent for creatively matching the image to your content.
Just have to know how to talk to the AI. And be willing to pay for it. It takes some finessing sometimes, and it’s not always very efficient, but it’s worth it in the end.
I apologize if this breaks any rules of decorum here, but I thought it was just a perfect fit. If it needs to be taken down I understand.
“The World is a business Mr. Trump:”
That was great. It’s been a very long time since I’ve seen that movie, didn’t get the subtleties before of Mr. Beale being gently shoved into the boardroom. Timeless relevancy.
I had the misfortune, and I do mean misfortune, to have been sat at a bar this afternoon in Birmingham (England, not Alabama) with Trump’s cabinet meeting on the screen in front of me. In what I believe was a lifetime first for me, I stated shouting at the screen every time a different sycophant took their turn to lavish praise on the boss. It didn’t feel like I had any control while it was happening and I have no idea what I was shouting. I do remember thinking that it was like watching one of those televised meetings that Putin had when he was losing the war. I think I must have TDS. Either that or someone spiked my drink.
You think Putin and Xi dared Trump that he couldn’t destroy both US democracy and the dollar’s world reserve currency status and he just sorta said “hold my beer”?
Maybe the most brazen corruption in human history. Seems natural to believe the envelope was passed using the $TRUMP meme coin. It’d would be out there on the Solana platform blockchain if so.
10Y up, 2.5bp from 4.50
DXY down
[Spock voice]Fascinating[/Spock voice]
Heisenberg, Jiffy Pop? With all the thrills these days in the market, and shrinking budgets I’m “popping” for Kirkland Brand at $0.35/bag. But I’m guessing you’re nowhere near a COST warehouse on that Island.
Is this all some behind the scenes NerdReich/Network State scheme to push Crypto? Not saying trump is smart enough to do this, but his handlers might be.
As H put it, chances are the US went into the trade war with China without a grand strategy. Or with a plan, but now we all know that plan stops working beyond 4.5% on the 10-year. Some of us may make the mistake to assume that China is taken by surprise by any of this. If I have to guess, China has been prepared for this since 1991. If there’s anyone who studied and learned from the collapse of the Soviet Union thoroughly, it’s China. They saw this coming from miles away. No, they might’ve waited for this moment for 34 years. So, if the current US administration thinks China is going to fold, they might want to think again.
China will not fold. The “big dog” has been offered dinner and it will eat.
On top of the tariff-induced inflation, US now importing even more inflation due to 6-7% depreciation of dollar since annihilation day (EUR / USD 1.147.
Here’s a paradox: The markets aren’t crashing this morning because they know Trump will fold on his trade war with China. Trump isn’t negotiating with China because the markets aren’t crashing
Also, since we’ve only come back from the brink of insanity to just plain crazy levels of tariffs, why aren’t the markets crashing anyway
the day is young…also, remember yesterday?
Impossible to argue with Mr. McElligott’s conclusion. So what will the “big brain” do to attempt to regain it? That’s what is scary.
BTW PPI today confirms “big brain” would have gotten his rate cut if he had just been able to abide.
Impossible to argue with Mr. McElligott’s conclusion. So what will the “big brain” do to attempt to regain it? That’s what is scary.
BTW PPI today confirms Trump would have gotten his rate cut if he had just been able to abide.
that was an awesome article