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In recent weeks, since Liberation Day on April 2nd, we have quite clearly seen that Trump, got to love him, is still very concerned about how the market responds to his policies. In other words, what most call The Trump Put is in play. Basically meaning, as the market goes down, recently often due to his own comments Trump will then say or do something that will underwrite the market providing a floor to the market by providing good news as and when required.
We saw this just a week after Liberation Day’s tariff debacle where he was first sending tweets, “it’s a good time to buy” and “Stay Calm” and then basically paused all reciprocal tariffs, bar China, which may have been the goal from the beginning – to focus primarily on trade terms with China. Although then two weeks later, about a month ago today, after things got increasingly worse he took the biggest backstep to cut the majority of China tariffs for 90 days as well. So we were left with roughly 10% tariffs everywhere and 30% on China, but nowhere near the Liberation Day levels.
Then just on Friday last week we saw Trump threaten 50% on the EU to begin June 1st, as negotiations were going nowhere! But then by today, Monday 26th, he agreed to hold off on that until July 9th.
So many threats and bluster but ultimately still playing his anchoring game of saying something extreme one day and then a few days later pulling back to something more reasonable.
So while there is clearly still uncertainty around where Trump’s tariffs will land after the various pauses expire and negotiations play out. What I think we can, hopefully, continue to rely on is Trump’s Put and his game, if we can call it that, of aggressively threatening far more severe actions immediately before agreeing to something more reasonable. And…overall, I see this as good news for investors and why I consider things far better today than when I put out my previous post/video on this topic suggesting the market reaction was overdone, click here to read/watch that. The S&P500 was about 5,000 at the time, it traded a little below 5,000 over the following days but then Trump pulled back the majority of his extreme threats seeing the market rally to 5,500 pretty quickly and since the China pause it’s come back to near 6,000. Meaning it’s around a 20% gain since I called a short-term bottom and in a game of predicting the future, where it’s impossible to call it perfectly, it’s nice to be close-to-right on the bigger moves throughout the year, as all your gain for a year can be made in just a few days. That’s the past though, what to do today? I am remaining long, although a little less long than I was a month ago, as sadly it makes far less sense for the market to trade much higher from here while the uncertainty remains. So I see the market somewhat trapped between 5,700 and 6,000 until the most important tariff deals are made. As market bears are going to be too scared to press their shorts hard after being crucified a few weeks ago and bulls have limited reasons to be aggressively long with the level or uncertainty that remains. Thus I see a more boring market trading on news for now. With the potential for good or bad headlines around tariffs on a near daily basis, it makes more sense to be long for me, as the Trump Put is still in play so any big down move on a bad tariff headline can be easily undone with a Trump reversal/deal.
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