As the sun asserts itself against what for many of us has been a brutal winter, it sheds some light on the inscrutable doings in our National Capital and their impact upon market conditions.
Whatever form this clarity takes, the emergence disinfecting solar rays should be taken as a blessing. Like many among you, I have felt baited and switched by these First 100 Trumpian Days, with the only consistent thread being that it features a global power grab — issuing from an individual with a somewhat skewed vision who, despite what he believes: a) is not a victim; and b) lacks the juice to achieve his larger objectives.
It pains me to have formed this judgment, because, being a conservative, and even, nominally, a Republican, I entered the year with high hopes that a healthy dose of freedom of choice and action, absent the threat of government interference, might significantly improve the vibe out there – particularly relative to the incessant scolding and meddling imposed upon us the preceding 4 years.
But that was not the strategy we encountered. Instead, we were treated to unilateral reorderings of International Trade, credible threats against the independence of critical organizations, and, of course, endless strings of ad homonym attacks against those holding non-conforming viewpoints — many of them issuing forth from a $6B for “profit media” platform, most of which is, somehow, majority-owned by the President of the United States.
It has been painful in its unfolding. Especially for those of us who disdain government over-reach and who whined like little bitches when Obama and Biden began to run the joint by Executive Order.
Because our side did not just call this bet, it pushed all its chips to the center of the table:
So, it’s clear to me that our boy wants to push matters as far as forces will allow. But thus far, he is finding out (much to our discomfort and his) that he still lives in a world where Acceleration Due to Gravity is fixed at 9.8 Meters/Second Squared. In order to incorporate this constraint, he is thus compelled to adjust his preferred tactics.
We therefore revert to the time-honored protocols of The Suck/Slap – known in more polite society under other handles, such as the carrot/stick. But I prefer the former, finding it, among other things, to be the daintier nomenclature.
Its present form involves aggressive assaults on prevailing relationship dynamics, followed by cuddly retreats. Examples abound. Go hog wild on tariffs only to back off multiple times prior to their implementation. Insult the Fed Chair, demand that he immediately cut rates, threaten his removal, and then issue a big, fat “never mind”. Kick Zelenskyy out of your office and invite him back a few weeks later.
We can speculate all day long whether the migrations from The Slap to The Suck reflect true changes of heart or the yielding to external pressures. Like most, I suspect the latter – particularly the market’s alarmingly negative reaction to the former.
All of which creates a rather tetchy problems for investors – particularly insofar as the best defense against a future full of slaps features anemic market action. And this reality extends beyond the likelihood that continued valuation pressure is the best antidote to you-know-who’s acting out. Because if we gin up a big rally here, it will do nothing but embolden 47 towards incremental misbehavior.
Market participants have thus been compelled to channel Ginger Rogers (about whom it was once appropriately said that she had to do everything Astaire did – backwards and in high heels). They therefore began with The Suck. And suck they did. For 6 weeks. A stiletto-shod Cornel Naz ascended a lofty 10% — from Inauguration Week until shortly after Valentines Day – reaching all-time highs on 2/19 before, no doubt feeling jilted, executing the slap. Here, with the full fury of a woman scorned, she initiated a descent. into the (she) Bear Market territory we encountered earlier this month.
The Slap worked. Trump backed off on most all his Heathcliff Hijinx, and was rewarded the last fortnight at any rate, with a passionate suck. Our indices are still in the red for the year, but certainly feeling more mojo than they were during those wretched days of The Slap.
But this here dance is just beginning, and the next two weeks should go a long way towards determining whether our next sensations will be centered painfully on our faces or joyfully below our waists. The remainder of the Mag 7 (except for the always-tardy NVDA) report earnings, and their temptation to guide down due to macro factors, so as to maximize the probability of glad tidings later in the year, must be substantial. This Wednesday, we will receive the first Q1 GDP estimates, which, whether as predicted in Atlanta, clock in negative or, as prophesied by The Street, be merely tepid, it is interesting to fathom.
The April Jobs Report drops Friday – one day after International Workers Day. And, across it all, we’re looking at accelerated negotiations with Russia/Ukraine, Iran and about 50 trading jurisdictions, all of whom, according to Truth Social, are in a desperate frenzy to cut deals to our liking.
My best guess here is that the upcoming news flow will shade positive. I AM concerned about the earnings calls, but figure that they will be, at worst, tempered. The Administration is certainly incentivized to cop some wins on trade deals, and I expect the rhetoric, at any rate, will be favorable.
I also have a hunch that P and Z are ready to deal, with much of the gory detail hidden from public view, but with sufficient bennies to tolerate Trump’s claiming credit for some world class peace-making.
Iran and China are a bigger problem, as we have bona fide conflicts with both — which stand in sharp contrast to the beefs we have manufactured with the rest of the world — as part of The Slap. But I suspect, short term, we’ll end up with something no worse than opaque even in these realms.
And there remains the enormous latent force of the vacuum lips of a market oozing with excess liquidity. This is my old drone, but it is perhaps more prominent at present than it has been recently. Because most risk asset purchasing pools de-levered during The Slap, and should they choose to continue to suck, can do so with great vigor over an extended interval. Perhaps even longer than we can last – if you catch my meaning.
I am nonetheless compelled to advise my minions to hold their lips in abeyance for a bit longer, or, failing that, to ease into The Suck with due caution. Again, there’s a passel of data flows on the horizon that could kill, or, at minimum, dampen, the mood. The economy, by appearance, is slowing. The status of the Fed Chair and the other members of the Open Market Committee remains unaltered, and, after executing a slap of their own on The Big Slapper (and having lived to tell the tale), they are unlikely, at least at its next meeting Wednesday week, to suck out a rate cut.
Thus far, we have negotiated exactly zero deals with key trading partners. The Middle East nightmare could take a turn for the worse.
I hear very little from a slapped-down Congress about a tax deal, which, if not enacted this year, will cause still-elevated U.S. Corporate rates to revert to the highest level in The Free World. They reconvene today, and maybe they will awaken – ideally absent the obligatory slap that occasionally rouse us from our deepest slumbers.
And then, of course, there’s the specter that will not take its leave – a redux of The Slap. A continued market rally, a couple of optically pleasing trade deals and the like, and we stand every chance of being yet again on the receiving end of that open, Big Orange Hand. And our best remedy against same is to hold open the possibility, if not outright executing, a slap of our own.
Again, I have a hunch that the sucking noise one hears each trading day will continue, and much as I’d like to give the “all clear”, encourage all to go forth and make some money, my reading of conditions, on balance, holds me back from such issuance.
Maybe I’ve been slapped to hard for too long. But that’s the way I see it.
Because Slaps abide. As do Sucks. And I close on a happier note with respect to the latter,
We can count on Sucks at some point in our future,
Swallows, though, are an entirely different, more problematic, matter.
TIMSHEL