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Well I think the market finally realized that Trump was serious about his tariffs and is now having its Holy Sh*t moment I mentioned on Sunday. As noted then, I think he is pretty serious about this stuff. Trump has been telling us all along about what he was planning to do; he said he was going to be nicer and that he was going to charge less to the countries that have tariffs on US exports. I wrote about this last night:
This is pretty much exactly what he did tonight, with more defining numbers. Based on his ad-hoc press conferences, which occur almost every day in the Oval Office, it sounds like these will be permanent. He has, after all, been talking about this since 1987.
The put wall has been pretty firm at 5,500, but that is now in play with the S&P 500 tanking by 2.8%, we could even open below that level. As I have noted before, 5,400 is essential because once it breaks, there is a clean shot down to 5,200.
Unfortunately, the market is expensive, credit spreads are incredibly tight, and implied volatility seems too low for what is coming. Trump wants yields to be lower and is now implementing the policy to do that, which means lower stock prices too.
From watching and observing the media landscape, I sense complacency and the thought that these tariffs are not permanent and are a tactic. I think the opposite: They will be around for a long time, and they are part of President Trump’s plans to push through his agenda and get his tax cuts. I see this as a way to generate income, shrink the deficit, and, more importantly, reshape and leave his mark on the world.
We will see what tomorrow brings.
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