Liberation Day or Liquidation Day?

* Market update* Scenerios* VIX History* Black Monday* Recommendations and LinksListen on Apple, Spotify, or Google Podcasts.Market Update📈📉After doom scrolling twitter for the last 60 hours straight, I have come to the conclusion that nobody knows anything.We’re 3 months into this Tariff war and if someone is claiming to know how this ends, they are either lying or Ignorant.But im going to trying and piece together the past to help make sense of today and give some scenarios that could play out in the near future.Trump 1.0’s reaction function was the S&P 500.Trump 2.0’s seems to be the 10 year treasury yield. And once inflation and the deficit are decisively under control, he will be back to focusing on equity markets.I’ve been attending a lot of fund manager calls and meetings over the last 2 weeks. HF, LO, Macro.This is probably the most negative on a forward looking basis I have ever heard such a broad swath of investors in the last 10 + years. Quite something given tech bubble in 2000, GFC in 2008, Covid and 2022.I think the fragility of this moment is not to be ignored. It would only take one “Truth Social” post backing off tariffs (“we have negotiated some good deals” or “waiting 90 days”) and a little bit of policy stability to start the pendulum swinging the other direction. Or 4/2 being anything other than absolutely terrible.* Oil down to 58 from 75 since inauguration day.* Rates are down meaningfully and creeping into the 3’s.* Truflation at lowest level in 4 years.* Dollar is down.* Credit spreads stable relative to any period with similar equity volatility.There is a massive degrossing in the long leg of the momentum factor; by some measures the sharpest down move ever in this period of time.The Nasdaq down roughly the same magnitude/velocity as the Covid crash.FII was less 20 days ago and Trump opened his speech focusing on how much the equity markets were up since his election. I think its reasonable to assume that he still cares despite all the rhetoric to the contrary. “No crying in the casino,”It feels to me like there is a little too much confidence that the Trump administration wants a recession. It cant possibly be lost on them the cost of a recession if one were to arise.Time will tell as ever. Below are some historical charts and scenerios’ to peruse…Scenerios:First, the tariff war just started so it’s early, but the bedrock of the “American exceptionalism” trade over the last 15 years has been the virtuous circle connecting stock prices, the allocation of corporate/societal capital, and the US government’s economic policies. This ecosystem generally worked well for most people, and a few weeks of turmoil does not necessarily threaten it. A few months of volatility and ever-lower stock prices, however, risks permanently damaging investors’ confidence in its foundations.The world isn’t ending. But the rules are changing. For decades, investors benefited from one major tailwind: globalization. Trade was open. Supply chains were efficient. Goods were cheap. That tailwind is fading.* Worst Case Scenario: The administration is serious about keeping tariffs in place long-term, with the goal of forcing everything back to domestic production and we enter an era of fragmentation. This would mean higher prices for consumers in the short and long term, rising inflation, and a real hit to the average American’s standard of living. We’d likely fall into a deep recession, and the markets could drop anywhere from 30% to 60% in a short period of time. It’s the classic stagflation scenario — slowing growth and rising prices — and it’s brutal for everyone. No one wins.* Best Case Scenario: This is all part of a “master plan” — an effort to create global uncertainty and bring countries to the table one by one for better trade terms and concessions on other issues. If that happens quickly (within six months), we could actually see interest rates drop, a recession avoided, and improved trade deals that ultimately benefit U.S. consumers and businesses. In that case, the short-term pain leads to long-term gain. Lots of winners here but its important to sus out the losers.* Badish Scenario: The intent is negotiation, but it takes more than a couple of quarters. Even if successful, the collateral damage in the meantime sends us into a recession anyway. Supply chains are disrupted, companies hesitate to invest, and consumer confidence erodes before any deals are finalized.The Market is leaning towards scenario 3 for one main reason in my opinion - The market and its participants believe that the administration lied about the tariffs being 'targeted' and 'reciprocal'. None of the math on their boards made any logical sense and it lacked any intellectual rigor. When Trump said 10% on all nations -- futures rose 1.5% on the news. That win would have raised the $600b (tariff taxes) he wanted/needed for his tax cut AND encouraged companies to ...