The Big, Beautiful Trade Deals That Aren’t.
if you’re following markets, the S&P 500 is up 17% year-over-year. At the same time, we know we had one quarter of negative GDP growth, a second of which would constitute a little word beginning with R. We know that inflation is up because of tariffs. We know that tourism into the US is down by a double-digit percentage, for obvious reasons. Meanwhile, Trump’s touted trade deals “are” coming through, with that verb in quotes because these fantastic, amazing deals, that no one’s ever seen anything like it before, are just, well, worse than the deals we had before– since we’re paying tariffs, which we weren’t before.
The market? Shrugging.
What’s going on?
Well, no one really knows. I am of the opinion that everything today is driven by TINA investing, or “There Is No Alternative.” This is the (conceptually quite dangerous) idea that you have to invest in high-valued stocks, because there’s nothing else to invest in. What could go wrong? Well, with Nvidia’s market capitalization packing all of around 15% of the valuation of the entire US economy? Plenty.
The AI economy is the vibe economy, and the vibe economy is precarious.
Valuation and Precarity
It’s been my experience that in times like these, when the total stock market is valued at a historic 200-210% of US GDP valuation, prices are held up by a hair trigger. Consider how the market took a huge dump following Trump’s “Liberation Day” tariffs. Trillions were wiped out overnight.
Similar “hiccups” occurred following suggestions that Trump would can Jerome Powell. Let’s recall that Trump complained about the guy who appointed Powell (he appointed Powell). Trump hates Powell because Powell was kinda sorta able to help the Biden Administration rein in inflation (which was partially the Biden Administration’s fault, but certainly also substantially the fault of the Trump Administration for also doling out trillions in cash during the COVID pandemic).
Trump also hates Powell because he wants Powell to lower interest rates, which Powell has no incentive to if the economy is as good as Trump claims it is. Theoretically, lower interest rates will drive investment because they stimulate lending. This isn’t really true for the housing market given a number of other factors, although Trump is making a (unsurprisingly erroneous) argument about how lower interest rates will help homebuyers. And we know that cutting interest rates can be seen as an “oh shit” signal as well as it can be seen as a “let’s invest” signal.
Conspiracy theories suggest the push for interest rates is because Trump owes Russia money, and the Kremlin holds some sort of kompromat that could be damaging to Trump. It’s not an outrageous theory, and we know that Trump has done multiple business deals in Russia and even once sold a palatial beachfront home to a Russian oligarch. It’s even less outrageous when you catalogue all of the billions in construction loans held not just by the Trump company itself but also by Kushner, who brokered tons of corrupt deals under Trump-45.
But little of this is public, so speculation is worth little. At least a small number of economists think the Fed could even increase interest rates.
Reliability of Data?
Making matters worse, there are even doubts about the veracity of US economic data, because we know that this regime lies about every other damn thing. Undermining the Fed’s independence and losing faith of the market to produce accurate economic data could be catastrophic (but it’s not clear whether either of these things will happen). This is, to quote a former president, a big fucking deal. If you can’t trust economic data from basically the wealthiest country on the planet, then it’s basically all fucked.
I heard the term “ticking time bomb” on CBC’s The Current this morning from a guest. Even Brian Sozzi– one of the only journalists to have blocked me on social media, along with Niraj Warikoo– seems a bit confused as to why the economy hasn’t plunged into complete ruin.
Are there other things that could derail the economy by way of the administration? At this point, seeing as they’ve been able to get away with making fun of disabled people (back in, what, 2015 now?), bragging about brutalizing immigrants, putting immigrants in concentration camps, depriving US citizens of due process, turning the White House into a conduit for crypto bribery?
I am kinda thinking that after all of these things have been excused, the administration is going to have a hard time derailing itself, at least in the eyes of its supporters. Seems like no one is even fazed by the fact that we’re paying tens of billions more in tariffs today than we were a year ago. Trump brags about how we’re raking in billions of dollars. Yes, from American consumers!
I don’t think the Jeffrey Epstein scandal is going to turn up a damn thing, if I’m being totally honest. If this government’s egregious lies thus far are any indication, it’s that they will lie about literally anything– whether we’re talking about general press conferences, or photoshopping tattoos onto the hands of detainees.
This means that Trump could– and certainly would, to save his own ass- pardon Ghislaine Maxwell in exchange for her lying in testimony that, oh, I don’t know, implicates Democrats but not Republicans? I would not put it past any one of these fascists. Although even Mike Johnson, the president’s personal lapdog, seemed to express skepticism, he said it’s ultimately the President’s prerogative.
You know, even when Trump contradicts himself. His supporters argue that it’s all part of the strategy. Four-dimensional chess, bro.
I guess we will see how many dimensions market sentiment has. I’ve been plenty wrong before about predicting market crashes, as I’ve been saying US equities are grossly overvalued since, like, 2017. But who knows? Doesn’t seem like we know a whole lot anymore.
