There’s been a lot of speculation that Trump wants the market to crash in his first year back—and honestly, the theory has some interesting angles.
The idea? Crashing the market now allows the administration to refinance massive amounts of debt at better rates while bond yields aren’t at all-time lows. Plus, if the market tanks early, it’s still easy to blame the previous administration instead of owning the decline.
And after the last couple of weeks of relentless selling, that theory is feeling a lot more believable.
Does the Administration Even Care About the Market?
Even if it’s a stretch to say Trump is actively trying to crash stocks, one thing seems clear: this administration isn’t worried about keeping the market propped up. They’ve already made it clear that market performance isn’t their top priority—and if that means stocks fall in the short term, so be it.
So if you’re expecting some big verbal intervention or Fed pressure to rescue this market, I think you’ll be waiting forever.
BUT—if you believe the market will find a natural bottom, debt will be refinanced at better terms, and then we’ll see a delayed but massive rally…
That’s actually not a crazy idea. Timing is the real question.
Market Moves: Watching the Divergences
Yesterday, we saw an interesting divergence:
- The S&P 500 (SPY) was struggling more than the Nasdaq (QQQ)
- Energy (XLE) and Financials (XLF) got hit again, while the Magnificent Seven were actually slightly positive
Normally, I love seeing QQQ lead the way, but I’d prefer it leading with both being extremely positive, not one barely treading water and the other taking hits.
But, for the moment, that bleeding is paused…
Today’s CPI Report: A Relief or an Overcorrection?
The Nasdaq is ripping higher on better-than-expected inflation data, and the rest of the market is loving it, too (except Apple, which is rather odd even in spite of some other pressures on the tech giant).
But here’s what I’m really curious about—are we going to overprice this good news right now because of how steep the recent correction was?
It feels like the market has already priced in everything being bad for the foreseeable future, so now, when even slightly good news comes in, we could be seeing an overreaction to the upside.
Right now, we’re getting a pretty aggressive push higher and I think anything within, say, 2% is a reasonable bump up given the recent average range of the market… But the real question is where things actually settle once the initial reaction ends (aka now).
- Do we actually get optimism stepping in and pushing us up for a giant day?
- Do we see follow through in the 2nd half of the week?
- Does one relatively minor report make investors decide the bottom is in and it’s time to pump this market higher?
I mean, I doubt it. But when everything has been negative and institutions are looking for an opportunity to step back in while retail investors have finally gotten bearish (put to call ratio flipped this week), you never know what can happen.
I expect those puts to get squeezed, it’s just a question of whether that’s through a real move up or a money grab to the upside before a bigger move down.
And, as I keep saying lately, I have no idea which is more likely which is why I have been so obsessed with two way options lately.
As I talked about yesterday during my live presentation, I think it’s a dangerous game to attempt to make back your losses on a downturn by switching to bearish positions late in the game. But you also certainly want to be prepared for more downside…
My solution? Set up a trade that targets a profit in either scenario.
— Nate Tucci
