All’s well that ends well?
That’s a question. I don’t know the answer. Stocks slipped Friday on Wall Street, but they nevertheless rose for the month against a never-ending deluge of foreboding headlines out of Washington D.C., where Donald Trump’s taken to unfurling giant, Kim Il-sung-style banners of himself on federal buildings.
A quick scan of Friday’s headlines reveals palpable concern in pretty much all corners for the state of America’s increasingly fractious union. As Bloomberg put it in an “essay” published ahead of the long Labor Day weekend, “The Cracks in America’s Rule of Law Are Getting Deeper.”
On Thursday and Friday alone, Trump revoked Kamala Harris’s secret service detail, arguably inviting violence against the former vice president, and decided to move forward with cuts to foreign aid by way of an obscure end-around which effectively usurps Congress’s power of the purse.
In the normal course of things, Harris’s special security protection would’ve expired this summer anyway, but Joe Biden extended it for a year. Trump canceled that extension. As The New York Times dryly (and somewhat ominously) noted, “the end of Ms. Harris’s protection comes just before she is set to embark on a nationwide tour to promote her new book about her presidential campaign.”
As for the foreign aid money, Trump moved to nix nearly $5 billion in funds for, among other things, UN peacekeeping, by resorting to something called a “pocket rescission.” The gambit, in which The White House waits until the fiscal year clock ticks down under 45 days (the required review period for requests to cancel already-appropriated funding), is contentious to say the least.
Susan Collins on Friday called Trump’s attempt to unilaterally cancel the funds illegal. I don’t know if it’s that, but I do know it’s another effort to defund US soft power initiatives. And as discussed in the April 12 Weekly (reach out if you need a resend), Trump isn’t doing himself (let alone the country) any favors by continually undermining US soft power.
For what it’s worth (not much, apparently), the GAO already told Trump that pocket rescissions are probably against the law. But that was during his first term. This is “Trump 2.0.” This is autocracy.
And then of course there were more headlines about the Lisa Cook drama. A two-hour court hearing Friday failed to produce any sort of ruling, leaving the legality of Trump’s effort to dismiss a Fed Board member up in the air at least until after the holiday. In reality, it’ll remain undecided for months, which is to say until the Supreme Court takes up the issue.
In the meantime, the question’s whether a lower court will grant Cook the temporary injunction she sought in a lawsuit filed Thursday. And whether SCOTUS will stay any such injunction.
And it just goes on. And on. And on. For example, I didn’t even mention the CDC, which is in a state of complete turmoil amid a leadership crisis brought on by former heroin addict and current US health czar Robert F. Kennedy Jr.
This is all quite unnerving, but I suppose its relevance for equity prices is limited. At least for now. After all, eight out of 10 firms beat on both the top- and bottom-lines in Q2 results, making this just-wrapped earnings season one of the best ever.
“Profit margins are rising for the S&P 500 and for the ex-Tech sector too, albeit more gradually,” SocGen’s Manish Kabra noted, adding that the bank’s constructive given “positive corporate profit trends and strengthening corporate activity.”
Speaking of “corporate activity,” the C-suite this month blew through the $1 trillion mark on announced buybacks. As discussed here earlier this week, 2025 was the fastest year to the $1 trillion mark ever. Birinyi Associates sees $1.2 trillion in executions for the full year. That’d be a record.
Sales beats, EPS “beats” (scare quotes), great margins and beaucoup buybacks: Small wonder US equities notched five more new record highs this month, and closed August with a fourth consecutive monthly gain. As the figures below, from Citadel’s Scott Rubner, remind you, the seasonal’s about to turn against stocks, though.
September’s historically the worst month of the year for US equities, and September 3 typically marks the high for the S&P.
After Labor Day, “FOMO tends to fade, curtailing buy-the-dip flows,” Rubner said, adding that the “next corporate blackout window will start mid-September.”
So, enjoy it while it lasts. The rally, I mean. And also American democracy. Both may be on shakier ground than we’d all like to believe.
Where does Trumpism ultimately lead, are we thinking dynasty like Ivanka the First. Hope not. It seems to me the discussion these days is focused around how democracy works or doesn’t. Dictators, kings, czars, supreme leaders etc, they all fail in the end, usually after hideous outcomes. They may last generations, but they fail. The genius of democracy with US characteristics is it’s designed so leadership continually changes up and down the board. This is the secret sauce. The absolute corruption of absolute power is short-circuited in this setup. Democracy was designed to last for the long haul.
The opposition to Trump is focused on all the ways he’s breaking the ‘how’ of democracy. They should start educating the populace on the ‘why’. It might help them understand that though they like some of what Trump does, it will ultimately fail and the longer it lasts, the bigger the mess it will leave. If allowed to persist if will kill mother democracy. Too many don’t understand the how, but in their ignorance they are easily persuaded it’s responsible for the ‘deep state’, swamp, socialists, commie pinkos and their rotten luck in life. They don’t realize it’s the only thing keeping the wolf of disaster from the door. Democracies make lots of mistakes, but they’re small and short-lived compared to the likes of Hitler and Stalin dictatorships. Time for another Star Wars movie where Ivanka, Don Jr and Eric watch their father turn into Darth Vader, though I would encourage Mr. Lucas to leave the country before it premiers.
I think all that matters is $1TR buybacks plus expectation of 300 bp FF cut over next 1.25 years plus potential for yield curve control to force long end down. The market is going with K.I.S.S., and not too fussed about inflation, employment, macro generally. Retail – aka smart money, recently – will buy any negative seasonality in Sept/Oct. Institutional – aka dumb money, recently – will chase in Nov/Dec.
That’s my most plausible scenario, anyway.
Since a federal appeals court has just struck down many of Trump’s tariffs on the U.S.’s global trading partners, does anyone here realize how disappointed Trump’s supporters are gonna be when they find out they can’t pay more for everything?
It feels almost guaranteed that this will go to Supreme Court, not likely to stand.
At first, I was thinking how disappointed Trump’s supporters are gonna be when they find out they can’t pay more for everything, but that won’t work. It’s too late. He’s already told them inflation was zero, so they are patting each other’s backs, congratulating themselves on getting prices lowered just like they knew Trump would do. They have since moved on from that to a new conspiracy that the libs have figured out a way to steal from them, saying they do not seem to have as much money as they did before and it’s happening to all of them.
Susan Collins saying something is illegal with the subtext that she won’t support it is like listening to a drug addict explain they finally realize the stuff is bad for them and are getting ready to quit.
The illegality of Trump’s tariffs, but the allowance of their continuation anyway, is like if I was running a program to steal money from every account (think Office Space) and a judge ruled I was breaking the law but let me keep the program running anyway. The law has lost all credibility in the United States because it has no teeth and all it took was one man to reveal that.
There is a large coalition of countries who have stopped all shipments to the United States. This is the type of unilateral response people with power should be taking domestically but we’re out of courage in here.
Well, he got everybody to quit talking about Epstein.