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Let’s get the day at the track talk out of the way first: Buying stock in a company is a bet on the future of the company. Buying a stock index fund is a bet on the future of the economy. Since these are bets on the future, the bettors in the markets are going to make a lot of different bets in times of uncertainty. And this is absolutely a time of uncertainty.
So when Trump signals that he’s “backing down” on tariffs, but he’s not going to back down on China, the market makes a bet. At this moment, the bettors think that’s good news, probably because they think China’s next. If not, why would they ignore this fact:
The top five suppliers of U.S. goods imports in 2022 were: China ($536.3 billion), Mexico ($454.8 billion), Canada ($436.6 billion), Japan ($148.1 billion), and Germany ($146.6 billion). U.S. goods imports from the European Union 27 were $553.3 billion.
Who gives a shit if Lesoto and Namibia are begging Trump for lower tariffs when China is ready to have a trade fight, and Trump is escalating our tariffs on Chinese goods to over 100%. $2,500 iPhones plus people losing jobs that rely on trade are going to lead to stagflation (stagnant growth, high inflation) in the long term, but short-term, the bettors move the markets as they re-adjust their bets. If investors really thought stagflation was coming, the sell off would still be going on. We’ll see what they think tomorrow, assuming Trump doesn’t back down from a trade war with China.
Now let’s move something more fundamental. The US the ultimate “safe bet” country, and our Treasury Bills are a refuge from uncertainty when markets are tanking. Not this time:
People around the world are selling U.S. Treasurys, which is very unusual when the stock market tanks. Generally when stocks lose value, investors have moved money into the bond market.
But in the past few days, money has been seeping out of the bond market, which is making these bonds much cheaper, generally. That is pushing yields on bonds higher, because bonds move inversely to their prices.
This is also called a “dash to cash”. Investors who used to trust Treasuries are becoming Vera Donovans: all their money is tied up in cash.
Nobody understands the bond market, and they certainly don’t follow it like stocks, but this is a more concerning development.
As long as Trump is President, the US won’t be a good place to invest. And even after Trump is gone, investors won’t want to invest here, since they have seen that electing a fool is a one-time thing, it just happens a lot.
Trump is having the time of his life. Signalgate is forgotten. Little countries are kissing his ass. Big countries are fighting back. He’s the center of attention, just where he wants to be.
Insert your favorite song about piece of shit males: here’s mine.
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