“A little disturbance.”

This is the phrase the President used last night to dismiss economic and market concerns about his tariffs on Mexico, Canada and China. He spoke for an hour and half and barely said anything else about it. My expectation was that he would make the case for why this disturbance makes sense for the economy, the business community and the American worker. He didn’t bother explaining anything.

A lot of people believe that President Trump and Treasury Secretary Scott Bessent are deliberately orchestrating a recession. But I don’t.

I am willing to entertain the idea that Bessent and Musk (and possibly Lutnick) have managed to convince the President that the stock market volatility will be temporary and not do any lasting damage to his “winning” image in the eyes of the voters. I just don’t believe that they’re willing to let this go as far as “cratering GDP” - not my word, people at JPMorgan and Goldman are saying the word cratering.

I’m sure this can go on for a few months. I just can’t see it going on for a few years. Long enough, perhaps, to generate a few dozen “Apple and Toyota are opening more plants in Kentucky!” type headlines. The problem is that consumer sentiment will worsen so long as this uncertainty lingers. And long-term unemployment will tick up. These negative headlines will swamp the MAGA-approved headlines about manufacturing wins and the policy’s going to change.

I don’t agree with the Galaxy Brain people who spend 90% of their day scrolling and threading amid the archeological ruins of Twitter. “This is about lowering mortgage rates and stock prices so Gen Z can break into the economy!”

Smoke less crack.

Anyway, here’s Michael and I discussing this “Hard Reset” theory and all the rest of the market moving news of the week. More than 30,000 have watched this in its first 12 hours, which means people are really trying to understand what’s going on…

Podcast version:

Cratering GDP

Just wanted to a spend a second telling you what they mean when they say “cratering GDP”…

The below is, of course, subject to change as new data comes in. We’ll get the next glance at it tomorrow March 6th. But this is the latest reading for annualized Q1 2025 GDP incorporating all of the negative surprises in recent weeks, per the Atlanta Fed’s GDPNow indicator:

This is a one-week drop from a forecast of +4% to -2.8%. Outside of the start of the pandemic, this does not happen. Just so you understand how this is calculated:

Bessent and Trump are said to be more focused on the 10-year Treasury yield than the stock market. They want the yield lower, which will be proof (in their eyes) that the DOGE stuff to reduce Federal spending is actually working. The thing is, if tariffs wreck the economy and send us into recession, the yield will be lower for a different reason - because the Fed is going to have to cut interest rates to save the labor market.

So we want the interest rate lower, but only for one specific reason and not for the other.

It’s all very tricky. Tough to thread the needle.

In the meanwhile, we’ve got tariffs, federal government austerity and less immigration. And all the requisite uncertainty for businesses and consumers that goes along with those things. Until someone changes their mind, this is the environment we’re in for 2025.

Thanks for reading, talk soon - JB