Remember when Senator Liz Warren urged The Fed to cut rates dramatically last summer and fall as Democratic Party approval ratings plunged into the toilet (but inflation was re-rearing its ugly head and spoiling the doves' party)?
Well, it's different this time... and probably 'dangerous' to democracy and a 'constitutional crisis'... as President Trump took to social media last night to urge Jay Powell to cut rates now in an effort to help the economy through some short-term pain from tariffs...
"The Fed would be MUCH better off CUTTING RATES as U.S. Tariffs start to transition (ease!) their way into the economy. Do the right thing. April 2nd is Liberation Day in America!!!"
Markets overnight didn’t react to the post immediately, but Academy Securities' Peter Tchir thinks it is one reason we are seeing any post FOMC gains erased.
S&P futures were in the 5640-5660 range immediately prior to the FOMC’s 2:00 pm release. They traded as high as 5720 and are now, all the way back to that 5640-5660 range.
In yesterday’s post FOMC report we argued that one reason for the rally in stocks was another day without bombastic tariff headlines. Maybe this isn’t “bombastic” but the markets are going to have to start thinking about what is going to happen on April 2nd. If we really are getting tariffs across the globe (seems likely) and there is limited excess manufacturing capacity in the U.S. (there is some, but much would need to be constructed), then I see a rocky road ahead for the economy. Maybe that recession risk is why the President thinks the Fed should be getting ahead of the curve?
There is a lot of “chatter” about uncertainty.
My fear is that the market isn’t pricing in what seems more and more certain – global tariffs shocking global supply chains.
Maybe it was just an 11pm post that will be retracted today, but all I can think of is the Simpson’s meme where Lenny is replacing 0 days without an accident, with another 0 days without an accident.
We spent a lot of time analyzing why I don’t think this series of policies is going to work in the near-term and might not work at all in Blue Jeans.
Tomorrow could get extremely interesting with allegedly a lot of negative convexity in the option market on Friday’s expiration. That tends to amplify market moves.
I went to bed concerned that the Fed, possible backing down on tariffs, and some semblance of a deal in Ukraine (though it looks more like Pearender – a combination of Peace and Surrender) – than Peace) would spark this rally people have been banking on. TQQQ saw large inflows and is now back to its highest share count since May of last year (yes, more bets are being placed on 3x leveraged Nasdaq 100 than heading into the election).
Across the board I see “froth” despite all the negative sentiment reports.
I woke up this morning, relieved that the market is now back to pre-FOMC levels but suspect soon I will regret not being bearish enough.
Good luck, and I think I’m finally going to have to suck it up and get a truth social account to track the President (though at least 10 people I follow and countless others immediately reposted the President’s comments – seen above – on X/twitter).
Finally, as we warned previously, this was all inevitable as the reflexive impact of potential tariffs (and recession talk, and partisan economics surveys) will weigh on the stock market, prompting investors to join the ranks of the right MAGA-ites demanding The Fed 'do something' to save their 401(k)s....
A win-win for Trump - he gets his foreign tariffs cake and eats domestic rate-cut pie too.
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