Orange Man Brink & Back

The Nasdaq 100 is up 17% since the lows of March 30th. Trump bought time, stabilising markets and his approval ratings, while laying the groundwork for further escalation with Iran.

Once more, Trump managed to deliver another successful TACO operation — while at the same time, convincing markets that the US is in full control of the situation.

Two things seemed to have mandated the sudden need for the now-failed talks in Islamabad.

• Markets crashing – always a Trump KPI
• The failed Isfahan operation

The operation in Isfahan was meant to retrieve Iranian Uranium stockpiles and swiftly call a victorious end to the war. Now stocks are sitting at all-time highs, Oil crashed back down to positive risk/reward territory for buyers — and no one knows what’s happening.

News from the American side are greatly conflicted to news from the Iranian side. Having followed both, I can safely tell you Western markets are tracking Western news and dismissing non-Western news. This remains true no matter what the Iranians say about the Trump Administration manipulating markets.

We have to concede: The TACO is strong and Trump’s market capital still has sway, even though his political capital is quickly being drained. This could be because markets still trust in Trump, or because time horizons are so short that it doesn’t matter whether Trump is lying or telling the truth.

What matters is how markets react to the news, regardless whether those news are true or false. In our decision-making process we have to consider that even if markets price in their own perception of reality — perception is reality. 

As soon as the ceasefire became a reality, markets quickly shifted to one, retreating from the all-out war scenario and two, pricing in further AI cycle expansion with the well-timed deals announced by CoreWeave.

This double whammy wrecked bears, and their retreat (via short covering etc.) pushed markets up even more violently.

The result was two-pronged: on the one hand we had the religious BTFDers saying, "I told you so..." and on the other hand the convicted Bears saying ".....WTF??!?!?!?"

But there is a reality beyond the reality that markets price.

Trump is in a bind where if he loses the war he is out, while if he goes all-in to try and win — markets crash, and again he is out. This dynamic partially explains the stop-go that we are experiencing in markets, dare I say a historically unique dynamic.

And this dynamic also explains the optics focus that Trump has – where perception is what matters, and reality is just the side show...

The Orange Man Brink & Back

During the 2008 Global Financial Crisis, the USA allowed Lehman Brothers to fail without intervention — only realising they overplayed their hand when things had already crashed. That’s when TARP was launched, and in March of 2009 the Fed cranked up Quantitative Easing and layered unconventional monetary policy support on top of an already extended fiscal layer.

The Trump version of Brink and Back isn’t as clear, with more complex relationships shaping the setup. 

In fact, Trump's version seems to be Brink and Back ....and Brink...and Back.