So much for decent tariff vibes in the stock market. Tech dragged down the major indexes with the Nasdaq falling over 3% and the S&P 500 down over 2%, closing at 5,276. The catalyst for the decline was chip export controls which caused Nvidia to take a $5.5 billion dollar charge.
At least bonds were well behaved, with the 10Y yield falling a few bps to 4.28%, the 2Y yield also fell, closing at 3.78%
Bonds will close at 2pm ET today and all markets will be closed in observance of Good Friday tomorrow.
Powell Rangers Can’t Find The Right Megazord
Powell will play wait and see with the rest of us. He acknowledges there may come a time when growth is falling and both unemployment and inflation are rising. If we reach that time of tension for the dual mandate the Fed will have to make decisions as to which gap they can best fill with their policy tools. With lowering inflation unlikely as tariffs take hold, the Fed doesn’t seem poised to cut rates anytime soon.
For the time being it seems the Powell Rangers aren’t going to be able to morph into the rescuers of the stock market….at least not yet.
Everybody Gets A Car
In data, retail sales rose more than anticipated as consumers looked to take advantage of current prices before tariffs kicked in, with autos being a beneficiary. Hope they enjoy the ride.
But For How Long No One Knows
Of course we’ve all seen data on auto loan delinquencies and repossession rates, so we’ll see how this mini auto binge ends.
Radical Uncertainty
With heightened uncertainty around tariffs on rare earth metals, pharmaceuticals, and other areas, the data seems to continue to take a back seat to “sentiment”. Or said in the terms that economists would reference that the hard data and soft data continue to diverge with the impact of tariffs evident in soft data but not yet glaring in the hard data.
As Keynes well knew, there are times where there is little to know scientific basis for calculating a probability, this is one of them. Sometimes you just have to embrace the fact that the economy is a complex and adaptive system. This is a time where the messiness, unpredictability and deeply human nature of the economy are at the forefront of economics as a social science.
The risk is falling for overly simplistic and purely quantitative approaches to today’s market challenges.
Combat Uncertainty With Fortitude
Risk refers to all outcomes that can be insured against, uncertainty to those which cannot. Mainstream economics does not recognize this distinction. They believe individuals can accurately calculate the odds of any action turning out one way or the other. This is because they treat the economy like a closed system.
Fortitude is the courage to face danger and to stick things out under pain. As Nassim Taleb says it’s not delayed gratification that creates an advantage for the investor, it’s the courage to live without promises.
“Under uncertainty, you must consider taking what you can now, since the person offering you two dollars in one year versus one today might be bankrupt." So what this idea is about isn't delayed gratification, but the ability to operate without external gratification - or rather, with random gratification. Have the fortitude to live without promises.” - Taleb
Markets can't promise clarity. Neither can policymakers. But maybe that's the point, fortitude isn't about knowing, it's about showing up anyway. As C.S. Lewis said “courage is not simply one of the virtues, but the form of every virtue at its testing point.”
XTOD’s:
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Listen—your career depends on it.
XTOD: If you're on the wrong train, get off https://pbs.twimg.com/media/GomBN1SWAAA6cze?format=jpg&name=900x900
https://x.com/zerohedge/status/1912609531453939885
https://x.com/NickTimiraos/status/1912566217887666304
https://x.com/ShaneAParrish/status/1912505473208660019
https://x.com/charlesmiller_7/status/1912201593581170793
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