“Liberation Day”

Various Sources (4/02/2025 through 4/30/2025)

Tariffs: reminiscent of a chaotic teenage relationship. Are they on-again? Or are they now off-again? Was it so naive to believe that reciprocal tariffs would be a few percent here and there? Apparently so. “Reciprocal Tariffs” came in much higher than what could have reasonably been expected. Negotiations are apparently taking place, although some countries, such as China, deny this. Industry-specific exclusions ebb and flow in the news, and various officials continue to voice conflicting unofficial opinions. Scott Bessent, while not very cheery, seems to be a soothing voice for investors. Howard Lutnick and Peter Navarro, on the other hand, are treated as the harbingers of doom despite having a generally happier tone. That’s somewhat ironic, don’t you think? 

Now, who should investors listen to? As radical of an idea that it may be, investors should instead choose to listen to their companies. This worked in 2021. When inflation first began to creep higher, CEOs across the economy first noted in the summer that it did not appear to be transitory. The Fed did not admit this until the end of November. 

So, what are companies saying today?   

• Amazon made news with rumors of including a breakdown of tariff costs on their website, implying that certain prices will increase significantly enough to warrant a disclosure.
• Car dealerships had high pull-forward volumes in March as customers looked to get ahead of incoming tariffs.  
• Some companies, such as Snap and GM, have pulled their guidance for the year. 

And yet,

• Walmart has reportedly sought to pressure Chinese suppliers to lower their costs. 
• Coca Cola stated that the tariffs are likely to be manageable for their business.  
• Among others, Abbott, Apple, Auto OEMs, and TSMC have all committed to increasing their production footprints in the U.S.
• Meta is seemingly undeterred by any macroeconomic risks and is pushing ahead with higher capex plans. 

I’m not sure if these outcomes are a shock to anyone, but these are all tangible consequences. I would choose to build a view using evidence like this, collected from the people managing the frontlines, and not relying on the to-be-expected chicanery and noise that comes out of Washington. And based on this evidence, consumers seem aware of incremental costs and are changing their behavior accordingly. Even further, many companies are diligently working with their supply chains to minimize tariff impacts, and some are even committing to a reshoring plan. If it seems inconclusive, that’s because it is. In my opinion, our economy has continued to grow increasingly bifurcated over the last several years. It does not seem like this is changing now. Times like these serve as a reminder that, “it’s a market of stocks and not a stock market”.   

“How an errant headline about a tariffs ‘pause’ briefly sent stocks soaring“

NBC News (4/07/2025)

In a deeply negative market on a Monday morning, an official looking tweet gave equity markets an 8% jump higher in a matter of minutes. It stated:

“HASSETT: TRUMP IS CONSIDERING A 90-DAY PAUSE IN TARIFFS FOR ALL COUNTRIES EXCEPT CHINA.”

As equities shot higher, it didn’t take long for other major outlets to run with the story; CNBC and Reuters ran the headline shortly after it was posted and circulated online. However, upon further digging, the source could not be confirmed and the statement was eventually denied by the White House. CNBC and Reuters withdrew the headline and issued corrections with stocks falling just as quickly as they had risen. The official announcement of a 90-day pause ended up coming just a couple of days later on the 9th.

I find stories like these fascinating, even if they may not have information that is immediately useful. This event has left me thinking about how information disseminates across a network; specifically, how “authority” or “informative reliability” is perceived by other actors. The account that the tweet came from is not affiliated with any major newswire and is instead seemingly managed by a single individual. In a vacuum, I doubt that CNBC or Reuters would have ran the headline based only on this information. Yet, “Walter Bloomberg” (not affiliated with Bloomberg) has 900,000 followers. If enough of these actors are convinced of the authenticity of the information and act on it, does this collective action increase the perceived reliability of the information? I think so. Should it have this influence? Probably not. Furthermore, does the required threshold for authority decrease in times of volatility and uncertainty? I believe it does.

Market efficiency relies on the “wisdom of the crowd”, yet sometimes the crowd can be tricked by its own shouting.