In recent days, the market has become an increasingly tense place, much like a well-crafted Halloween terror house in which you never know at what moment some creature is going to come bursting out of the wall to scare the hell out of you. It might be during market hours, or after hours, or during the weekend. There’s just no telling anymore what’s next and when it’s going to happen.
The monster news that was loudly teased by the President is, evidently, some kind of trade deal with the United Kingdom. I’m not sure how crammed the shelves in your house are filled with British goods, but the fact that the United States exports are more to the U.K. than we import is absolutely no surprise.
I mean, honestly, what are we talking about here? Land Rovers, curiously strong mints, and ventriloquist dummies. That’s about all that springs to mind. The fact is that there probably isn’t any lower-hanging fruit when it comes to a trade deal than our home nation of England. Added to which, I strongly suspect whatever “deal” is announced will be no meaningful difference than has existed for decades. We shall soon see.
Setting aside the U.S. the United Kingdom as a whole imports about one-third of everything they use in their economy from other countries.
Whereas China, which I needn’t remind you is vastly larger, has an import level in the teens. My point being that working out a deal with a nation which already has a “favorable” trade relationship with us (in the administrations eyes) is a piece of cake.
I think we can all agree that the notion that we can shutter the IRS since the revenue from tariffs is going to utterly replace it is, at this point, just a bad joke. Even if the poster board from April 2nd was rock solid, and all those tariffs were in place, it wasn’t going to happen, but at this point, with all the delays, exceptions, carve-outs, and exclusions, the additional revenue from tariffs probably won’t even cover the big Presidential 79th birthday military parade on June 14th.
Just over the past couple of days, we’ve had to deal with two shock events. The first, marked with the blue arrow, was the evidently life-changing news that Bessent was heading to Switzerland for a tete-a-tete with his Chinese counterparts. The pop from that announcement was burned off within 24 hours. The red arrow marks the Big Trade Deal Coming news, and it’s already started to get chipped away.
We remain inside what I’ve dubbed the Zone of Uncertainty, bounded above by the March 25th peak and below by the Fibonacci (which we PRECISELY hit yesterday, and is still acting as support).
I remain in a relatively conservative stance, just under 100% committed in my trading account, and I will not consider using margin until after Bessent does his soft-shoe on Sunday. In the meanwhile, we can all just tense up from the next creature that’s going to jump out from the corner ahead of us in the Haunted House of Disappearing Tariffs.
