When the Trump Trade Goes Sour

Trump, Tariffs and the Stock Market

“The stock market and the economy aren’t the same thing.”

It’s a cliche… but the reason you hear it so often is that it’s true.

“Many pundits argue that the fluctuations of the major indexes tasked with tracking the performance of the country’s biggest companies have little impact on the average American,” says an article at Investopedia, “as the majority of shares trade hands among the super-wealthy.”

Word. If the stock market truly represented the well-being of most everyday Americans… and if most everyday Americans vote their pocketbook… well, with the major averages setting one record after another this year, you’d expect the Democrats to win a resounding victory, right?

Obviously, that’s not what happened.

But what does that mean for your stock holdings — however modest they might be relative to “the super-wealthy”?

Over the years, Donald Trump has been of multiple minds on this issue: To what extent does he believe the stock market reflects on his economic performance in office?

During a debate with Hillary Clinton in September 2016, he sounded the following alarm: “We're in a bubble right now. And the only thing that looks good is the stock market, but if you raise interest rates even a little bit, that's going to come crashing down. We are in a big, fat, ugly bubble. And we better be awfully careful.”

Of course, that was at a time when almost no one expected Trump to win — least of all Trump himself.

Then Trump became the proverbial dog that caught the car. For the duration of his presidency, he sought to keep that “big, fat, ugly bubble” inflated for as long as possible — mostly by jawboning the Federal Reserve to keep interest rates low.

On the eve of Trump’s second term, he’s still focused on the stock market’s performance — if this morning’s Wall Street Journal is to be believed.

The paper has an update on the state of play with the top economic posts in a new Trump administration: It appears Robert Lighthizer — who was U.S. trade representative in Trump’s first term, and deputy U.S. trade representative under Ronald Reagan — will be shut out of a senior role.

That’s not altogether surprising if you recall what Jim Rickards said in this space on Nov. 19: “Treasury secretary is the only position likely to interest Lighthizer at this stage of his career.”

But the treasury secretary job went instead to hedge fund manager Scott Bessent. And the position of commerce secretary went to a Wall Street CEO, Howard Lutnick.

As the Journal puts it: “Trump, his advisers said, was more interested in New York financiers for top economic jobs, and he expressed concerns that a choice without Wall Street chops could spook the markets.”

So Trump doesn’t want to “spook” the markets?

We won’t automatically assume that’s true: After all, this is corporate media relying on the usual anonymous “people familiar with the matter.”

But if it is true, it suggests Trump might not follow through on his aggressive tariff agenda.

Our recovering investment banker Sean Ring says as much in today’s Rude Awakening: An across-the-board tariff of 20% would inevitably hit the share price of American multinationals. It’s unlikely they could pass along all of their higher costs to consumers — so thay’d have to eat at least some of those costs themselves.

That could be a quick 5–10% hit to the S&P 500.

The “Trump trade” would quickly go sour.

“While some domestic-focused sectors, like utilities and health care, might be more insulated,” says Sean, “the broad impact of such tariffs would weigh heavily on investor sentiment and market performance.”

Sean says there’s precedent from Trump’s first term: Amid growing trade tensions (and rising interest rates), the market took a quick 20% tumble from all-time highs during the autumn of 2018. But the bear market was short-lived, and the S&P reclaimed record levels by the spring and summer of 2019.

So maybe Trump would be willing to weather that again — especially now that he’ll be more focused on his “legacy” and not on winning another term.

Sorry we can’t offer a more definitive forecast than this. We’re just telling you about the breadcrumbs we’re following — context for headlines you might see in the weeks and months ahead.

When those crumbs lead to actionable advice, you’ll be the first to know.

Echoes of 2008 as a CEO Is Gunned Down

Mr. Market can be strange. A top executive of a company is shot and killed in a targeted hit — and shares are up 1.3% on the day.

We speak of the gunshot in New York this morning that killed Brian Thompson, the 50-year-old CEO of UnitedHealthcare — a unit of the colossus UnitedHealth Group (UNH).

Police say they know enough to call it “a brazen, targeted attack” — but as of this writing, the suspect is still at large.

Nothing official about a motive yet… but if you’re like a lot of people, your first reaction probably was: Oh, is the perp someone who was screwed out of coverage for a catastrophic event?

Certainly that’s the vibe on the wallstreetbets Reddit board: “Are the poors finally rising up?” says one post. “At least the right people are being targeted,” says a reply.

Hmmm… Shades of the sentiment that greeted the bailed-out banks and other Wall Street firms during the 2008 financial crisis…

One thing’s for sure: Someone went to a lot of trouble to off this guy. It would have been fairly simple to pop him any old day as he was leaving his house in a leafy suburb of Minneapolis.

Instead, the gunman waited until Thompson ventured to Manhattan — and killed him hours before he was set to deliver an investor-day presentation. Maximum impact — except in UNH’s share price.

As for the rest of the market, all the major U.S. indexes are in record territory.

The big gainer is the Nasdaq, up 0.9% to 19,657 at last check. The S&P is the laggard, up a third of a percent to 6,071.

The commodity complex is quiet — gold a few pennies shy of $2,650, silver at $31.32, crude at $69.34. Bitcoin sits a little over $95,000.

Martial Law and Market Disruption

South Korea’s benchmark stock index, the KOSPI, shed a modest 1.44% today after it turned out that martial law lasted all of six hours.

When we left you yesterday, it wasn’t certain the country’s stock market would open for a new day. President Yoon Suk Yeol had told his citizens that the country’s opposition parties were undermining “the constitutional order” and possibly in cahoots with North Korea.

What followed after we hit the “send” button can be summarized thus…

Yoon: I forbid any political activity and I forbid the parliament from meeting.

Parliament: Yeah, we’re meeting anyway and we’re voting unanimously to lift your martial law order.

Yoon: Uhhh… OK.

The government is still promising “unlimited” liquidity to prevent any market disruptions. No sign of disruption yet — but this episode won’t exactly inspire confidence in foreign investors, will it?

It’s worth taking a moment to contemplate what all this means for war or peace on the Korean Peninsula — especially with Trump’s return to the White House in view.

As you might recall, Trump met more than once during his first term with North Korea’s tubby tyrant Kim Jong Un. Clueless Western media outlets said it was another instance of Trump “cozying up to dictators.”

In reality — and as we reported at the time — the biggest driver of the peace process on the Korean Peninsula wasn’t Trump or Kim, but rather South Korea’s president at the time, Moon Jae-In.

Every indication is that Trump’s national security adviser John Bolton sabotaged that peace process — issuing new demands out of the blue.

Whatever progress was made stalled out well before Trump left office in early 2021 and Moon left office in mid-2022.

Moon’s successor, the hapless coup-monger Yoon, has been much more hard-line when it comes to North Korea — a stance backed by the Biden administration.

Washington and Seoul have restarted major war games — and last year, Biden sent a U.S.-armed nuclear submarine to dock in South Korea for the first time since 1981.

Yoon made a point of phoning Trump after Trump’s reelection last month — but at this point it seems Yoon faces either impeachment or resignation.

To be continued…

Will the DOGE Recommend an End to Time Change?

Oh, please, please tell me this is true…

It seems there’s been some chatter about time change on X in recent days. At one point, Elon Musk replied, “Looks like the people want to abolish the annoying time changes!”

Musk’s partner at the DOGE, Vivek Ramaswamy, chimed in that daylight time is “inefficient & easy to change.”

“It’s not clear if moving away from the practice would be something supported under a Trump administration,” says Forbes, “but to do so would require an act of Congress and approval by the president.”

We’ll leave it there for today, pending further developments. If you want to see what folly time change is both for human well-being and economic sanity, I refer you to this back issue of our 5 Bullets from November 2023.

Mailbag: Tariffs, Nukes

After our initial reaction to Donald Trump’s tariff announcement last week, one of our regulars chimes in…

“The tariffs are a negotiating tool — they are not intended to be applied. Rather they are the incentive to do something about illegal migrants using their countries to charge across the U.S. border. If you deal with this, there won't be any tariffs to affect your business as usual.

“I just wonder why people and business leaders have such a hard time understanding this simple solution. A storm in a teapot?

“I am much more worried about the specter of nuclear war that the idiots in D.C. and Europe seem to be intentionally trying to bring upon you and me.”

Dave responds: Agreed on the last point. But as for the “negotiating tool”...

Up until now, tariffs served one of two purposes — either generating revenue for the government, or “leveling the playing field” for favored industries.

But using tariffs, or the threat thereof, to stanch the flow of migrants — or drugs? That’s novel.

I’m not sure the rest of the world will take too kindly to that. Again, I commend Sean Ring’s wide-ranging edition of today’s Rude Awakening…

“With regard to the reader's comments about trying to guess when and why Putin/Zelenskyy/Biden will set off WWIII, may I suggest that world wars do not start instantaneously,” writes our final correspondent today.

“Despite all other factors and provocations, the only real harbinger of the start of said war is when the price of gold makes a ‘limit up’ move for, say, three days in a row. Certain people, not just a few, will be in the know, and will try to capitalize on it causing such action.

“Only when this actually happens is it time to head for the hills.”

Dave: Hmmm… I’m genuinely curious about whether your thesis bears out — but it’s not as if we have much of a data set to work with here.

The gold price was fixed at $20.67 an ounce at the time of World War I and $35 at the time of World War II — so we can’t use the previous world wars as a guidepost.

Nor can we look to the Cuban Missile Crisis of 1962, since gold was still fixed at $35 an ounce up until the “Nixon shock” of 1971.

So all we’ve got, really, is the “Able Archer” scare of 1983 — an episode we recalled earlier this year with the help of Jim Rickards.

Jim says based on now-declassified documents the U.S. intelligence community definitely tracks the movements of physical gold around the world as a precursor to nuclear attack.

But it’s too hard to say based on this one episode that a price spike was associated with the very real possibility of nuclear war breaking out in September 1983.

While crashing deadline — actually, I’ve totally blown deadline today — I can’t pull up a daily chart of gold prices back then. But on a monthly basis, gold fell steadily throughout the second half of that year…

Best regards,

Dave Gonigam
Managing editor, Paradigm Pressroom's 5 Bullets