At the time of writing, we’re roughly a week deep in processing Liberation Day. With it comes the full spectrum of emotions, ranging from excitement and anticipation to worry, doubt, and fear.
Whether you’re on board, on the fence, or just plain against it all, the plan is now fully in motion. Trump is performing surgery on a bloated, out of shape, extremely expensive patient and wants our economic adversaries to foot the bill.
In the media, the alarm bells are officially sounding. Much of what they’re calling out now has been on the radar of those with eyes to see for years. Can Main Street withstand the temporary blow that promises a full recovery and higher quality of life?
Here, we work to unpack Trump’s playbook, serve up reminders of what’s still bubbling beneath the surface, and end with how to face The Ordeal.
Unchained Melody
As we watch Trump duke it out with his enemies on the world stage, many wonder if there’s a method to the madness. The answer is yes (not just to blow up Pelosi’s portfolio).
Back in the 1950s, our nation used to be a manufacturing powerhouse. Unfortunately, the gradual deindustrialization of the country blew America’s Heartland apart. Our nation has also fallen behind other major world powers, namely China, which puts us at a huge disadvantage in the event of an actual war.
Historically, civilian factories (and the know-how that comes along with them) play an integral role in rapid militarization. Right now, U.S. deindustrialization is at a critical weak point. One of Beijing’s state-owned firms built more commercial ships just last year than all of America has produced since the end of WWII.
From this lens, Trump’s attempt at restoration goes beyond us being able to say “we’re the best.” It’s a matter of national security.
Sometimes, you have to break a bone to reset it properly, and that doesn’t come without pain. We watched the stock market go into a free fall. Volatility madness rolls on each day as new trade battles hit the headlines.
As price increases come into view, the already inflation-exhausted American consumer takes another punch. As tariffs come online with the goal of domestic industrial revival, we’re also hit with the reality that our factories won’t scale up overnight.
The new magic number is 2026. Front-loading the pain now will hopefully have us seeing benefits sooner rather than later. And yes, it’s a risky gamble.
If all goes to plan, we’ll finally get our raging debt under control. Manufacturing will be reborn in a brand new Golden Age. We’ll see our global leverage restored and all those who have backed Trump from the start get validation and vindication.
If it fails, we’re looking at more inflation, retaliation, and lost midterm elections. The 18 month countdown to the outcome has now begun.
Food for Thought
While the drama of Liberation day continues to take center stage, here’s what else we’re watching:
- More cracks are forming in the U.S. credit market. The North American High Yield Credit Default Swap Index surged to its highest since the Aug ’24 sell-off (377 points). The North American Investment Grade Credit Default Swap Index surged to its highest in at least 15 months (62 points). Thanks to these jumps, it just got a lot more expensive to protect against bankruptcies and defaults.
- Rumblings of a U.S. travel boycott could have huge consequences. The travel and tourism sector accounts for more than $1T of GDP, supports roughly 20 million jobs, and majorly dwarfs the auto industry.
- In recent months, surveys of CEOs and CFOs show corporate confidence has declined. CEO confidence one year out is now at its lowest since 2010.
To quote Howard Marks, the only way for investors to significantly outperform is to periodically stand out from the crowd. In the face of the unknown, how you choose to walk through darkness determines who you are on the other side.
The Way Out Is Through
In every hero-centric story, things eventually come to a head and the main character is flung into what’s known as The Ordeal. By this point in the tale, the hero has gone through a series of trials and tribulations to prepare them for their biggest conflict yet.
It’s in these life or death moments that the hero is forced to think on their feet. They’re also forced to surrender to whatever The Ordeal is about to throw at them. The stakes are high and the rock bottom is deep.
Whatever the outcome, one thing is for certain: the hero’s life is forever changed. Will they defeat the enemy there and then with a stroke of luck, or will we have to wait for the sequel?
In this new era, the only certainty we have is that the uncertainty will continue. All we can do is focus on what we control. Anticipate a bumpy ride and hope for the best.
Because every great journey has a soundtrack, we’ll leave you with some song lyrics:
And nothing is impossible, nothing is out of your reach
It’s just another love song, just another melody
So keep believing in your dreams, life’s not what it seems sometimes
And love the air you breathe, you got everything you need for tonight
{Stick Figure – Weight of Sound}
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Until next time,