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The Storm Is Starting: A Market Reckoning Looms
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The Storm Is Starting: A Market Reckoning Looms

Draining the Swamp, Shaking the World

Everything looks decidedly shaky all of a sudden. Trump is swinging the wrecking ball. Markets are tanking. What to do?

A bear market was long overdue, but now that we are teetering on the edge of one, it doesn’t feel very nice.

Markets don’t like uncertainty, and there is a lot of it about at the moment. President Trump likes to create it. It’s one of his negotiating tactics. And he is creating one heck of a lot of it.

Unlike his previous presidency, when he made a lot of noise but wasn’t able to get much actually done, this time around he seems to be shaking up a world order that has been in place for decades, both internationally and at home.

Is he serious about America no longer being the world’s policeman? It seems he is. It began with a global freeze on most U.S. foreign aid as part of his “America First” policy, and USAID’s closure is reverberating internationally. Many have lost their jobs; some 10000 grants and contracts have been canceled, disrupting global aid programmes and more. So much of it was illegitimate, bent, or wasteful. Elon Musk called it “beyond repair” and an “evil criminal organization,” boasting of feeding it “into the wood chipper.” Maybe so. Doesn’t mean ending it will be easy. Anything but.

There have been cuts to the federal workforce; numerous bodies, such as the Social Security Administration and the Consumer Financial Protection Bureau, have been targeted.

But at present, the administration is moving quickly and breaking things. Many support what is happening. Many don’t. Nobody knows quite how far this will go, but it seems a lot further than anyone anticipated.

Europe is going to have to pay its way, and he really means it. What are the implications of that?

What is going to happen between Russia and Ukraine? What deal does he have in mind? Will Presidents Putin and Zelensky go along with it?

What’s going on with tariffs? Are they really about the revenue (I don’t think so) or about something else? What are the implications there?

What is the reaction from Trump’s political opponents going to be? They’ve started attacking Tesla factories. They hate him so much they could not even bring themselves to applaud when a terminally ill child with brain cancer was given an honorary Secret Service award. Whether it’s in the courts or on the streets, they will oppose everything he does. They would rather have corruption, waste, and no transparency than have Donald Trump.

The amounts that have been saved so far are disputed. DOGE claimed $55 billion in the first month. Others have it closer to $15 billion. Either is peanuts in the context of the $2 trillion figure Elon Musk touted during the campaign and reiterated post-inauguration. This would represent roughly 30% of the federal budget ($6.75 trillion 2024). We are a long way from that. There are a thousand billions in a trillion.

Musk is aiming for $1 trillion to be cut from the U.S. deficit in the first year. We are a long way from that too. Even with all the cuts, one Reuters analysis shows that spending has actually increased under Trump, largely due to the increase in interest payments on that extraordinary $36 trillion U.S. national debt. President Joe Biden increased that debt by $8 trillion—31%. Though, to be fair to him, Trump increased it by almost $8 trillion (40%) in his first term.

I remember when it was below $10 trillion, and that seemed like a lot.

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Was he right?

Remember this freaky interview I posted back in October?

The preacher man who described Trump’s assassination with uncanny accuracy, then talked about a mighty crash. People are always predicting crashes and getting it wrong, but this guy was amazing.

Aaaaagh. Scary!

As I say, if there is one thing markets don’t like, it is uncertainty. And we have that in abundance. Nobody quite knows how this is going to pan out. I, for one, am incredibly optimistic. The sooner the system is drained of corruption, waste, rent-seeking, non-productive endeavour, crony capitalism, non-accountability, and all the rest of it, the better, in my view.

But I recognise there is a mountain, and more, of upheaval to get through first.

Thank goodness we have such a large allocation to gold. It is behaving like a trooper. Who knows? A mining boom might even come out of this.

But the stock market does not like it one bit.

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