A lot of posturing aside, it’s pretty obvious that Donald Trump reached his pain threshold last week for stock and bond losses stemming from what was widely decried as a ludicrously mismanaged (and just plain ludicrous) “reciprocal tariff” rollout.
The “Trump put” in equities is struck just below SPX 5000 and just above 4.50% 10s in bonds. Maybe the consumer electronics exemptions are “temporary” maybe they aren’t, but Sunday’s “bad cop” messaging was replaced on Monday by Trump floating relief from auto tariffs for “some” manufacturers and Kevin Hassett ruling out a downturn.
In a cameo on state television, Hassett talked up “amazing” offers from several countries and said the US “100%” won’t experience a recession this year. How can he be so sure? Well, he can’t, so either Howard Lutnick’s going to fudge the data or Kevin’s willing to be the guy the who looks silly in hindsight. That wouldn’t be new territory for Kevin, by the way: Hassett famously published a book called Dow 36,000 on November 14, 2000.
Anyway, US stocks were bid and Treasurys were too to kick off the holiday-shortened week. Right or wrong — I think right in the near-term — markets view the 90-day “pause,” the “temporary” Apple exemptions and, now, the prospect of selective auto tariff relief as evidence of a “blink.”
“The local risk asset relief” is a function of “accelerating ‘flinches’ in the Trump administration’s tariff policy,” Nomura’s Charlie McElligott said, noting that traders now believe the worst case is off the table.
After all, Wolfe Research’s Tobin Marcus wrote, referring to the administration’s insistence that the electronics exceptions shouldn’t be viewed as exemptions because those products will eventually be taxed under semiconductor-specific levies, “the prospect of sectoral tariffs several months in the future is much less threatening than reciprocal tariffs today.”
And that pretty much sums it up. Notably, earnings season in the US has the potential to offer some relief from the macro shock which, as you might imagine, drove up correlation (figure on the left, below).
The figure on the right shows the earnings seasonal. “We have the potentially virtuous turn from macro to micro with US equities earnings season launching,” McElligott went on. “We are priced for large dispersion, which can help extend the vol bleed lower to a certain extent.”
Of course, out of the woods we most certainly aren’t. For one thing — and Charlie mentioned this — elevated realized vol will likely limit the deployment of whatever risk budgets are left following the scorched earth, post-“Liberation Day” vol spike.
And from a macro perspective, we’re only three months into a four-year term for “Tariff Man.” If past is precedent, he’s going to see any period of asset price calm as an opportunity to dial up the tension.
On Monday, a group of small businesses sued Trump over the tariffs. “His claimed emergency is a figment of his own imagination,” they said, in the suit.
Certainty is certainly not clear with markets sitting on the edge of their seats. Cringeworthy expectations from here on out? Or maybe not?
“Hassett talked up “amazing” offers from several countries and said the US “100%” won’t experience a recession this year”
Are you sure it was not Larry Kudlow out making that promise? You’d better recheck your sources!
two things can be true at once
Some persons will say anything they have to say for good reasons, no reasons, or dubious reasons.
Unlike most of us, when they look at themselves in the mirror they say:
“Am I not magnificent!”
Bruno the Bear
Looney Tunes
Big top Bunny 1950
https://www.dailymotion.com/video/x7so2xd
Jesus H! Lutnick strikes me as a walking poster child for the Dunning-Kruger effect, perfectly capable of believing that he could blow the BEA cooking the economic books right past…well, everyone. “Cover up a recession? Never! We just made a couple of minor methodology revisions.”
Thankfully, there’s absolutely no fentanyl left in America. Otherwise, I’d be inclined to believe that the whole administration is using.
Well said !! I’m guessing Bessent will survive longer than Lutnick. Miller defies the imagination altogether. Perhaps the Administration has recognized the uncanny correlation between Vol spikes in stocks and Treasury bonds while… and soon after Navarro is on TV. Trial and error… writ large.
I’m guessing the FED put is really a liquidity put. And the bond market put is definitely 4.5 % yield on the 10 year Treasury. I think the S&P could easily go lower to approx.4400 based on upcoming earnings, especially if companies withdraw guidance due to lack of policy visibility.
Oh Canada!
The Mouse That Roared Back!
https://www.bloomberg.com/news/articles/2025-04-15/avoid-us-or-take-burner-devices-canadian-executives-tell-staff?srnd=homepage-americas&sref=Dw2LdB7M
What’re the odds of the lawsuits having an effect?
Interesting question. The lawyers are still sorting themselves out. Putin likes to defenestrate big shots. Maybe Lord Donald will try it to see if he likes it.
“His claimed emergency is a figment of his own imagination”?
If only…rather than intentional misrepresentation and manipulation in furtherance of the MAGA quest for post-truth elimination of the rule of law.