Markets That Respond in Real Time to Geo-Political Events are Dangerously Clinging to Prior False Narratives

The world needed Donald J. Trump in the White House so badly. The need was palpable. Now, we’re beginning to see why.

Monday's market response to his tariff threats against Mexico and Canada were, in a sickeningly cynical manner, hilarious.

First, the futures markets sent stocks skidding lower, which extended into the opening hour of the cash session. When Mexico's president, Claudia Sheinbaum, agreed to send military troops to the Southern border and crack down on border crossings and trafficking of humans and drugs into the United States in exchange for a month's reprieve on imposition of the tariffs, markets were relieved.

Stocks jumped.

Later in the session, ineffectual Canadian Prime Minister Justin Trudeau agreed to similar terms, markets shrugged and moved on, still with a sense of doubt and uncertainty, finishing lower, though only slightly.

What happened to USAid offices over the weekend and into Monday morning, with Elon Musk and his merry bank of DOGE staffers diving headlong into slush fund records and oceans of graft and corruption, is a sign of things to come. While USAid was likely the major conduit of hush money and payoffs to congressional grifters, other departments will be found to be similarly weak and dishonest about their expenses.

Just wait until DOGE begins to examine the Defense Department. That's when the real bombs - truth bombs - go off.

As for markets that react like Pavlovian dogs to Washington's whistles, it's all been done before. Rich valuations, the product of too much hype, hope, and speculation, always end up in a dumpster fire of despair.

It's worth noting that President Trump, who hailed stock market performance in his first go-round as President, hasn't but once mentioned Wall Street antics or praised their gains or leadership.

All of the tech billionaires - Bezos, Zuckerberg, Ellison, et. al. - bestowed riches on the Trump inauguration and were prominent in attendance. They don't care about stock prices or whether they're worth $100 billion or $50 billion or even $25 billion on paper. They have power, access, and, so long as they toe the line and kiss the ring, they'll be just fine, thank you.

Markets at nose-bleed levels and valuations that would make Michael Milken blush are more the product of slick salesmanship and the greed of passive investors. The baby-boomers, millennials, and tag-alongs from generations X, Y, and Z, will never see what's coming, even though it's staring them in the face.

In the meantime, party on. While there may not be much more in terms of upside for the general markets, there's still ample time to get out of Dodge before the sheriff, tariffs, and the Man from DOGE show up.

At the Close, Monday, February 3, 2025:
Dow: 44,421.91, -122.75 (-0.28%)
NASDAQ: 19,391.96, -235.49 (-1.20%)
S&P 500: 5,994.57, -45.96 (-0.76%)
NYSE Composite: 19,870.33, -128.50 (-0.64%)