Hard Landing Denial

The consistent theme of 2025 since Trump was inaugurated, has been investors in denial over the scope and scale of Trump's trade war. As of today, investors are STILL in denial about Trump's resolve to rebalance America's trade deficit.

Right now, trapped bulls are telling each other that everyone else is bearish. They reach this conclusion on message boards amid the comfort of universal consensus:

Zerohedge Monday morning:

"...unless you think the system is about to collapse, then Warren Buffett's maxim to be greedy when others are fearful makes sense at this moment..."

Meanwhile, ultra wealthy Trump supporters are in absolute shock at Trump's willingness to collapse markets in order to rebalance global trade. The ultra wealthy believed all along that this trade war was merely a clever ploy to gain some "quick wins" on trade before cutting their taxes again. After all, that's why they elected him - for tax cuts, not for trade wars!

Overnight it was Trump acolyte Bill Ackman's turn to criticize his own candidate:

"A billionaire backer of Donald Trump has urged the US president to pause his recently announced trade tariffs, or risk "a self-induced, economic nuclear winter"

Despite the shockwaves, the American president has defended his new import taxes, saying "sometimes you have to take medicine to fix something".

Bill Ackman actually called Trump's massive tariff escalation last week a "mistake".

A mistake? What's that? I have news for Ackman and every other Trump supporter - Trump doesn't make mistakes. He has never admitted to a single mistake in his entire life. Which means every trapped bull can take Trump capitulation totally off the table, even in a global economic depression. When the economy collapses into depression, Trump will simply use that downturn as cover to escalate his trade war. After all, that is exactly what happened in the 1930s:

As I pointed out on Twitter, this trade war is similar to the trade war in 1930, however it's not identical. The key difference is that the Smoot-Hawley tariffs DID NOT cause the Great Depression as so many economists right now would have us believe. The infamous Black Monday market crash took place in October 1929 and the tariffs were not levied until June 1930 - eight months later. The Smoot-Hawley tariffs did not cause the Great Depression, the Great Depression was already starting and it led to a global protectionist movement to offset mass layoffs that were taking place at the time.

This time however, the sequence is the opposite - trade war preceded this nascent market crash, but investors were in denial that this trade war was real. Recall that a mere two weeks ago, markets saw "monster inflows" ahead of Trump's massive escalation, because investors were in total denial that he would escalate.

Ackman calls this "self-inflicted economic winter". I call this, self-inflicted moral hazard:

March 21st, 2025:

Over the weekend we learned that even AFTER Trump's massive escalation last week, retail investors are STILL in denial:

April 4th, 2025:

Taking Trump capitulation off the table leaves just the Fed to bail out these markets, but ironically the Fed is not going to capitulate and bail out markets until they see something break that gives them cover to rescue stocks.

Unfortunately, that won't happen as long as investors are still buying the dip with both hands. It's this perpetual dip buying that buffers the downside, suppressess volatility and prevents the market from finding a bottom. We now await mass margin calls and a huge spike in volatility to bring the Fed off the sidelines.

In summary, the thing that has to break in order to bail out consensus bulls, are consensus bulls.