One of — perhaps the highest — hurdle to successfully trading Donald Trump’s policy machinations is overcoming incredulity and its synonyms.

Simply put: You have to get over the despairing disbelief elicited by someone who makes reckless endangerment a point of pride while occupying the highest office on Earth. And at least for the purposes of investing, you have to set aside any accompanying wariness.

If you can’t do that, you’ll wake up every day convinced the apocalypse is nigh, and in some cases, Trump will actually say as much.

My “edge,” if that’s what it is, comes not from any sort of discipline, nor “nerves of steel.” The opposite, really: Recent epiphanies notwithstanding, I suffer from a pervasive sense of existential dread which manifests as, among other personal horrors, a suspicion I might’ve died 14 years ago (figuratively, but who knows, maybe literally) and a penchant for fatalism and catastrophizing.

Those are all personal-level afflictions and they take up so much mental space there’s not enough room for fear as it relates to the rest of the world’s daily anxieties, a lot of which are a direct consequence of Trump’s incessant impositions.

I don’t “tune him out” as much as everything else that’s going on in my head drowns him out. So it’s not difficult (at all) for me to, say, buy stocks when they fall as a result of something “crazy” he’s said or done.

In most cases (and if I had kids I’d swear on them that this is true), I don’t even read his social media posts, let alone subject myself to video replays of his out-loud meanderings before I trade on them if headlines suggest something he typed or said triggered an exaggerated swing in this or that.

I’m much more comfortable trading his craziness blind than I am investing in a deliberate, informed way around something like “SaaSpocalypse.” I bought some Microsoft this year, but not a lot, and I didn’t buy the broader software dip at all. By contrast, I bought plenty of index exposure both to US and European shares during the war.

Sure, I’m relatively confident the AI disruption narrative’s overdone for software businesses, but I don’t know enough about the specifics to put a meaningful amount of money on the line. (I don’t use leverage and I don’t generally trade options, so it takes a lot of money to make a little bit in my case.)

By contrast, I’m absolutely sure that Trump’s i) full of shit, not necessarily in the sense that he won’t follow through on threats, but just in a generalized sense of the term and ii) more likely than not to stumble into a halfway decent outcome relative to worst fears during any given manufactured crisis, if for no other reason than in each and every case, worst fears = some riff on armageddon.

Most people, either due to the complex and daunting psychological challenge mentioned here at the outset or, in some cases due to professional imperatives for hedging risk, have a difficult time looking past today’s “Truths.”

Headed into mid-April, for example, professional capital allocators were, by their own account, the least Overweight equities since last July.

There’s the chart. It’s from the April installment of BofA’s Global Fund Manager survey, which showed equity allocations fell to a net 13% Overweight, down a stark 24ppt MoM.

For comparison, recent lows on that metric were a net 17% Underweight this time last year (around “Liberation Day”) and a net 52% Underweight in September of 2022, which the keen among you will remember as “peak USD wrecking ball” / Liz Truss / gilt crisis month.

Suffice to say fund managers weren’t well positioned for the best three-week rally on the S&P since the rebound from the March 2020 COVID shock lows. For its part, the Nasdaq heads into next week riding the best streak of gains since the peak of Kurt Cobain’s fame.

Note that April 17’s sharp drop in crude (catalyzed by coordinated messaging from Trump and Iran that the Strait of Hormuz is open as long as various ceasefires hold) was accompanied by the most dovish 2026 Fed pricing since March 18.

Traders are now pricing two-thirds odds of a 25bps cut from the Fed this year and I gotta say: I agree with BofA’s Michael Hartnett that easing bets have further to run, and probably a lot further. That likely portends a significant bull steepener at some point (not investment advice).

In the same April BofA fund manager poll, expectations for a steeper yield curve plunged to the lowest level since November of 2022.

That’s a function of the “extreme hawkish” reversal in DM front-end rates last month when surging oil prices and concerns about a “permanent” closure of the Strait prompted a sharp repricing in central bank expectations.

Now, with oil perhaps set to settle in a lower range than what many assumed just days ago, flatteners will need to be reassessed, although whatever the new range for crude might be will probably still be higher than the pre-war range.

So, what’s the rub? What could go wrong? Well, most obviously, Trump’s crazy. And I have a difficult time believing Israel will let up enough in Lebanon to keep the peace.

But beyond geopolitics, an S&P that’s up 13% in three weeks — and a Nasdaq that’s up 13 sessions in a row — is “due” for a breather.

As SocGen’s Albert Edwards pointed out this week, stocks are even more expensive relative to bonds than they are on an absolute basis.

The figure shows the extent to which the rally to new records pushed one measure of equity expensiveness near the most extreme levels in a quarter century.

“Even when [the S&P’s earnings yield and the 10-year Treasury yield] were equivalent at the end of March, stocks were still historically expensive relative to bonds,” JonesTrading’s Mike O’Rourke remarked, noting that a 3.9% earnings yield “has been a valuation resistance level of sorts in recent years.”

“While stocks can trade higher and push the yield lower, meaningful gains require a major earnings acceleration,” he went on. “Historically, those come after earnings troughs, not from record earnings.”

On Saturday, the IRGC said “control of the Strait of Hormuz has returned to its previous state.” In light of the continued US blockade of Iranian ports, the waterway’s back “under strict management and control of the armed forces.” That’ll only change if Trump allows “freedom of navigation for vessels traveling to and from Iran.”

Just a few hours later, the Royal Navy said the Guards fired on a tanker in the Strait. The ship’s captain said no one was harmed.

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