Ratings Game

When Donald Trump was just a bombastic TV star and not an existential threat to world order, he would use the Nielson ratings service as the litmus test of his success. The Apprentice program was actually wildly successful, often garnering top ratings for TV watching in the pre-streaming era. It existed in a bygone era of positive public opinion of Wall Street, which predated the 2009 GFC meltdown. Those halcyon days are a distant memory now. The stock market is the new yardstick for the Trump phony reality show in Washington, and so far, the early ratings are in, and they're getting worse.

As the tariff and Doge initiatives have become more policy than puffery, their negative repercussions have begun to weigh on investor confidence. Cue the flight-to-quality bid that has pushed down bond yields simultaneously as the Greenback and the U.S. stock market are beginning to struggle. Attention has shifted from the inflationary effects of tariffs to their dampening effects on growth. And shortly, the guy with the short attention span (and even shorter fingers) will start to feel the heat. Even his financial soother, Bitcoin, is struggling.

His favourite 'Apprentice' celebrity candidate, Elon Musk, is busy gumming up the works in Washington in a ham-handed fashion, with questionable results. People are beginning to tire of him and his chainsaw tactics already. The goal of massive savings from firing government workers is laughably optimistic. Legal challenges to the cuts are multiplying, and pushback from the purported 'deep state' is building. Oh, and Tesla sales in Europe are down a quick 45%, too.

Meanwhile, Trumpian immigration and trade policies are increasingly being seen for what they are - deflationary. Consumers are already suffering from the post-Covid ramp-up in the cost of living. With the cost of housing already too high, you can add the breakout in lumber prices and the effects on auto prices from steel and aluminum tariffs. You see what the fuss is all about. And that is before Trump shrinks the labour market by driving net immigration to zero, furthering the cost squeeze on corporate profits and consumer confidence.

Lumber

I have stated clearly in recent blog posts about the current flip in the correlation between bond and stock prices. The time when a lower bond yield would result in higher equity valuations is over. This week is further proof. The quality trade that drove the Magnificent Seven stock rally is also over. Don't ask me - listen to the market. Company after company is doing the 'beat but guide down' narrative dance in their conference calls. As I said last week, U.S. bonds are bid and the only safe space besides gold and cash.

I won't go all Warren Buffet on you and tell you to hide under a rock but his $ 300+ billion cash hoard is the biggest market timing call in history, and I'm not sure it isn't right. The 60/40 portfolio is now making a strong comeback. Maybe TINA is

dead. The economy is suddenly cooling - GDP Now estimates are sharply lower - and Trump's fiscal follies won't help either, as they curtail consumer confidence and capital spending plans. Meanwhile, the Fed is a deer in headlights now. They are waiting for something terrible to happen before acting. They may get it shortly.

Atlanta Fed GDP Now

Wall Street Deal activity has ground to a halt, awaiting policy clarity that won't come soon. AAII Sentiment has collapsed. Lay-offs are the next shoe to drop, and given the caution from companies, they will act swiftly to any hint of weakness. Now that the shiny coin trick of growth and AI that has mesmerized investors for the last year is in the rearview, it won't take much to see this market down a quick 10% on any hint of economic weakness. The catalyst for the sell-off in the form of a Nvidia guide-down looks like a good bet now. That's tonight, by the way!

I'm now awaiting a sell-off that will provide an entry point that has been lacking for months. It should serve as a wake-up call and a rating review of DJT's and Musk's performance on their recent episode of 'The Apprentice 2.0.'

I'm expecting bad ratings from the market. I'm hoping it will be saying in a very clear voice ... "yer fired!"

Risk Model: 1/5 - Risk Off

Suddenly, the Model lined up with my cautious thinking. Last week, the VXV, RSI, and Copper/Gold all reversed hard on just the slightest hint of economic weakness. There has been a weakening in the support from both breadth and volume underlying this market for months now. The chart below is not comforting to the bullish case. When volume and breadth fail to confirm a new market high, you had better listen. As my old friend Pat Taylor would say at times like this, "Get out!"

Vanguard S&P500 ETF