I think there's a broad consensus that, more than anything else, in 2024 Donald Trump was re-elected because moderates were unhappy with the price of groceries. The toll of inflation was somehow attributed to the CHIPS act and student loan forgiveness rather than the great money printing of 2020. Just today, the guy who made that printer go 'brrr ͥ ' said, "We're well aware of what happened with the pandemic inflation". There's a story to be told about Election 2024, but that's a story for another time. This post is about what's happening in the markets and in DC that might impact the retail investor.

BTW title ref.


For the last four years, the Fed's path to a soft landing (fixing inflation with no recession) was clear: raise interest rates quickly and go slow with QT ͥ . It's certainly worth remembering how many pundits predicted economic disaster when rates were raised to 5%+ in a very short period. Those people were proven wrong by the ensuing three years, with inflation reduced to near-target levels while markets and GDP still reached all-time highs. The slow path down from peak interest rates was unexciting, with the Fed telegraphing every move and assuring the public they were taking no chances. Fiscal policy was similarly mundane - Biden pushed through some big infrastructure projects and otherwise bought spending down from the covid spendfest. Except for Russia's invasion of Ukraine, it was an easy market to make money off of.

President Trump is, if nothing else, the embodiment of volatility. This can be a good thing for theta gang ͥ -inclined individuals such as myself, but both bulls and wheel traders lose if the market tanks. So what are the risks?

• Tariffs and retaliatory tariffs
• Trump's penchant for borrowing i.e. cutting taxes and printing money to juice GDP
• Any possible attempt to replace Jerome Powell with a yes man like Sam Bankman-Fried or Hulk Hogan
• Other macro events such as conflicts involving Russia, Taiwan, Iran or any of the territories the administration has claimed they will annex (Canada, Greenland, Panama, Gaza). I should say, I don't expect the US military to be asked to do anything other than airstrikes and special operations over the next four years, but with the guardrails gone and plentiful annexation rhetoric, I'm not ruling them out.

Runoff room

In March of 2020 we got a peek at how our economy can absorb a crisis. With interest rates near zero, the government and Fed relied on a lot of QE ͥ and fiscal stimulus to keep things going. Interest rates are upwards of 4% right now, so if you don't mind surrendering to inflation in its final throes, rate cutes are available as stimulus. The Fed balance sheet is still quite hefty and if any of the rhetoric about a budget crisis are honest, we might not be able to rely on deficit spending.


Tariffs (or 'tarrifs', to many) have been a significant issue since Trump promised to use them to fix the budget deficit and 'fix' various 'trade deficits'. Unfortunately, since discussions can only be bipolar, in common discussion tariffs can only be one of two things:

1. A cost incurred soley by other countries
2. A cost incurred solely by US businesses/consumers

Seems like both are lies; an efficient market will distribute the added costs to all parties involved find its equilibrium. Foreign producers will attempt to meet US consumers somewhere in the middle unless margins are too low to be worthwhile. But the net effect is that things will get more expensive.

I'm not outright for or against tariffs. To its credit, the administration (I'm told) closed the 'Temu loophole' whereby extremely cheap merchandise bypassed certain duties. I should caveat: this loophole could be back next month if the administration was simply using it to extort concessions from a foreign power.

The use of tariffs to resurrect certain industries seems unwise in the same way that there's little to gain from investing in coal mining or punching a wave. There are profitable industries where the US is competitive and could benefit from measured protectionism. Legacy auto companies fought tooth and nail to avoid a transition to EVs and so Tesla became the premier electric car. We are competitive there, so promoting domestic EV sales makes sense unless, say, the brand suffers a meltdown at the hands of its 4chin CEO. There's also retaliatory tariffs to consider. With Japanese and German EVs finally getting mass produced, the international market share strangehold Tesla fought to establish could be ripped away with tariff-caused price hikes. It's the kind of thing that requires calculus and nuance, and I wonder how much of that is happening behind the veneer of all-caps tweets about retaliation-for-retaliation.

On the subject of EVs and unnuanced moves, as I recall Biden tariffed Chinese EVs in a huge way (notably without social media cat fights). These may have been protectionist or simply "due to regulatory and/or national security reasons these cars will never be sold here". In some ways it was a bro move to Xpeng and BYD as they could simply rule out the US market. The alternative might resemble the way American tech companies tripped over themselves to get access to the rapidly growing Chinese middle class market, only to find themselves slowly phased out and subjected to mandatory IP sharing.

Tariff whiplash

Source.

Trump is a negotiator and as any good negotiator will tell you, it's not a deal unless you've stormed away from the table a half-dozen times. The White House spent much of February and March announcing tariffs against Canada and Mexico, then delaying them in the eleventh- or sometimes thirteenth hour. It made for some bigly headlines and market swings.

4theFrontPage

Speak loudly and carry a small stick... Or something like that

For most of us, the tariff announcments and market response were unpredictable and/or after hours. For a select few, frontrunning the announcements may have been good money:

An ambitious crypto trade made and closed in the hours surrounding a Trump tweet about creating a federal crypto reserve.

The current paradigm of - as a reporter at the Fed presser today phrased it - "government-by-tweet" certainly creates an opportunity for people connected to the president to profit from the news, like in the crypto trade above. And like Congress trading off of confidential information, this is almost certainly completely legal and otherwise pardonable.

Revelati123

OMG Donald Trump committed the crime of failing to disclose stock sales! THATS IT GUYS WE GOT EM!" Thomas: "Ehh... I dunno... Seems cool to me!" Alito: "Stocks, and socks, only one letter different, so pretty much the same thing, are you trying to tell me I CANT SELL MY OWN SOCKS!?!" Kavanaugh: I... LOVE... BEER... AND I HATE SEC DISCLOSURE FORMS! Barrett: "Bible says you are GTG!" Gorsuch: "The founders are silent on the issue of meme stocks..." Roberts: "I lobotomized myself with a power drill when I realized this was going to be my legacy. So why not... I think there are some more judges or something but their opinions really dont matter. so... Yeah I dont think Dons going to jail for this.

Escalatory tariffs

The on-again-off-again tariff war phase was followed by escalating tariffs as each side responded with matching or increased severity.

ajmeko

I'm hoping there's an "out" somehow that allows him to save face while dropping this bullshit.

Certainly, we wouldn't want a politician to have to bear the brunt of their decisions. Anyway, the clamor about tariffs has died down for the moment, they're supposed to actually take effect in early April.

Mel Gibson moment

I'm not sure the cause of the following CNBC article but I'll construct a plausible story:

1. The president was displeased that Canada did not roll over and all the bad press
2. He talked to Stephen Miller
3. He did a press conference

CNBC

Major stock indexes dropped sharply this week, as rattled investors struggled to get a handle on President Donald Trump's sweeping and shifting tariff policies. But when asked in the Oval Office on Thursday whether he thought it was his tariffs that were scaring the markets, Trump pinned the blame elsewhere. "Well, a lot of them are globalist countries and companies that won't be doing as well," Trump replied, "Because we're taking back things that have been taken from us many years ago." Trump did not elaborate on what those things were. "We've been treated very unfairly as a country," he continued. "We protect everybody. We do everything for all these countries, and a lot of these are globalist in nature." It was not clear what was globalist in nature, but NBC reported Thursday that the Trump administration is considering an overhaul of how it interacts with NATO allies. Later in the same press event, Trump again blamed globalists for the market downturn. "I think it's globalists that see how rich our country's going to be, and they don't like it." Over the course of an hour, Trump used "globalist" to describe people, companies and countries, making it difficult to pin down specifically what he was talking about. But during his first term, Trump repeatedly denounced a set of ideas he called "globalism," and labeled some of his political opponents globalists, as he pushed his nationalist, isolationist worldview. The word has drawn condemnation from critics who say it is linked to antisemitic conspiracy theories about Jewish people. According to the American Jewish Committee, the term globalist is used today as "a coded word for Jews who are seen as international elites conspiring to weaken or dismantle 'Western' society using their international connections and control over big corporations." It was unusual for Trump to use the term globalist as a catchall for what he claimed was driving day-to-day movements of the stock market. The White House did not immediately reply when asked for additional context about Trump's invocation of the term. The Oval Office remarks came as Trump, just two days after imposing 25% tariffs on Canada and Mexico, issued temporary exemptions for many goods coming into the U.S. from the two neighboring countries. He denied that those pauses came in response to the market rout.

For a front page, mainstream news article, this had an impressive amount of veiled condemnation.


Federal Reserve chair Jerome Powell is in a tough spot. He's trying to finish his campaign against inflation while adjusting to a new fiscal reality while also avoiding a visit by Elon Musk's goons. I talked about the first two things above, the third would be more at home in another post about the "constitutional crisis" headlines that have been flying around. To put it as succinctly as possible:

• In its majority rulings, dissents, and concurring opinions, elements of the Supreme Court have been waging a war against independent government agencies. This has included advocacy for the unitary executive as well as indignation that there be Article II entities not funded by Congress (Fed, CFPB, Social Security Administration, FDIC, ...).
• The administration has pressed the issue to an eventual SCOTUS showdown by firing the heads of independent agencies, most notably the head of the Office of Special Counsel. The outcome of this decision may directly impact Powell's job security.

So today's pre-FOMC banter didn't downplay the situation:

/u/watcherofworld JP is gonna raise a personal army. That's the actual announcement. Nothing economical, just the warlord plans.

/u/boredpandaguy Immortan Jerome

/u/joelbealesubc WITNESS !! The rates ascend !!

/u/PotatoWriter Into WallStreeta, Shiny and regarded!

/u/Eye_am_Eye Ahhhhh mediocre!!!!!

/u/FlatOutUseless JP shaves his head and becomes Prigozhin

/u/Track_Boss_302 NCD found its way into WSB

/u/Specialist_Fig9458 SHOIGU! GERASIMOV! WHERE IS MY FUCKING RATE CUT!

The Fed's statement is typically a copypaste of the prior one with certain terms added or replaced. In this case, they replaced "the economic outlook is uncertain" with "uncertainty around the economic outlook has increased". I believe that's the FOMC's version of an all-caps tweet demanding the White House chill out.

And so they've decided to hold interest rates at 4.25-4.50 for now but slow QT ͥ .

JPow didn't have a whole lot to say at the press conference, it was variations on "what we're doing is working". Journalists asked things like, "have you considered doing something else" to which Powell replied "yeah but this is what we think is the right choice". They also tried to bait him into condemning the White House's tariff regime. Powell stayed diplomatic, replying that tariffs are inflationary but won't impact their long term strategy.

As I mentioned, Trump likes interest rates to be at zero and so he took to his Twitter clone and condemned the FOMC decision.


Elon's been spending a lot of time in DC. His absence from his normal duties combined with his controversial PR metamorphosis have not been great for Tesla's sales figures or share price. When asked on Fox Business if there was any turning back on yoloing into DOGE, he heaved a huge sigh and reverted to a mindless talking point, "I'm just trying to save the country."

Musk probably vented to his buddy in the Oval Office and so not long after, Trump announced that he was buying a Tesla...

I had no idea 'car salesman' would be so literal.

... and then did his Goya beans routine with a cykatruck while dropping some new meme formats.

"I love Tesler ͥ !"

"Everything's computer ͥ !"

Pure gold.

"This is the Secretary of State, brought to you by Carl's Jr."

/u/NematoadWhiskey August 5th 2021 President Joe Biden did the same thing promoting Hummer Ev and Jeep Rubicon Ev on the south lawn of the White House and announcing an executive order to have 50% electric vehicle sales by 2030 to be exact. This just proves Reddit is brainwashing all of you.

/u/Own-Solution60 Biden was publicizing a policy promoting EV's with three different EV manufacturers present. He wasn't shilling 1 vehicle with the CEO standing next to him while reading from a script like a used car salesman. Come on man!

It's not supposed to make sense.

Here's what I'm optimistic about for the near future:

• TLT/TLTW - we're winning against inflation and there's a chance SCOTUS rolls the Fed into the unitary executive.
• BRK-B - went heavily into cash before the current pullback, could be a stable wheel trade.
• NVDA, my beloved - LLMs are integrating into everything, agentic AI is coming. It all runs on CUDA.
• Energy - somewhat surprised energy ETFs haven't mooned due to the administration's energy/regulation/environment posture.
• Speculative stuff like ACHR and JOBY.

Hopefully it'll go better than this.

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