Blain’s Morning Porridge July 25^th 2025 – Manic Market Vulnerable to a Confidence Wobble.

 “The consumer is not a moron. She is your wife.”

Donald Trump never disappoints in terms of “interesting”. MAGA/Trump might unravel, and Trump spontaneously combust, due to Epstein  – but conflict was what we knew Trump would bring to the table. The real risk to markets is probably the US Consumer. They are not as resilient as the rosy earnings season thinks.

I am loving 2025. There is never a dull moment. But it feels increasingly manic. It all got a little unhinged this week – 7 days of Donald Trump bluff, bluster and gobbledygook. He’s let the Epstein narrative rile him… Trump is clearly struggling to hold it together – and a volatile president on a very short-fuse could tip things messy at speed.

Now, there may be Americans who truly believe Barack Obama tried to mount a coup against Trump in 2016, or that Fed Chairman Jerome Powell is deliberately wrecking America by building himself a marble palace and keeping interest rates too high. Some folk may cheer when White House press secretaries hail hasty trade memorandums as the most important agreements in history, but they are hardly the basis for long-term stability across global trading networks. They are but scraps of paper hoping to cast the Dear Leader in a positive light, while America’s former friends and allies fume and plot over the way they’ve been treated.

In the White House situation rooms… worried glances are being exchanged. How many Washington Republicans who’ve been repeating Trump’s delusional and distractive talking points are now seriously questioning what sort of rabbit hole they’ve fallen into?

Among the White House journalists I am told there is a “Deadpool” betting board: which of the big fish in the Trump administration will be first to go of their own volition? (Everyone predicted Musk – too easy – but, who will be next? Apparently one well known shock podcast host said; “none of them have the ethical intellect” to do so.)

Is the Washington comedy a problem for markets?

Not really. We kind of knew this is what was likely to happen… The one thing we know for certain is Donald Trump’s unfailing ability to fall out with just about everybody – given time.

All the markets have to do is price the risk of increasing US political instability and decreasing competence into the equation. Thus traders, investors, bankers, financiers, and the commentariat are wondering….

• Just how far can this go?
• What does it mean for the sustainability of the already fully priced US stock market?
• What questions should we be asking about how much worse the debt metrics could look if political competency and stability continues to unravel?
• What are the potential risks a suddenly beleaguered Trump and a fragmented Republican party raise in terms of economic confidence?
• If consumer confidence tips, what does that mean for retail participation in markets? It’s been retail FOMO that’s kept prices so high! If they leave….

We are coming to the tail end of the US earnings season, and thus it’s been the corporate outlook we’ve been focused on – it’s been fairly robust  with some great numbers from banks and the Mag7 AI proxies. I read that 25% of analyst reports on this earnings seasons have used “resilient” to describe the outlook for the economy, consumers and the firm in question’s outlook.

Really???

There is nothing resilient about US consumers. Analysts on Wall Street may call them resilient, but in the real world they are described as “tapped-out”, hit by still high interest rates, resumed student loan payments, stagnant wages and fears on whether they can afford medical bills after the Big Beautiful Bill tax-giveaway to the wealthy. Consumer credit default rates are rising, auto-loan delinquencies are 13% up – the highest levels since 2010 in the immediate aftermath of the Global Financial Crash.

Give Trump credit. Much of what he’d done has been surprisingly effective. It has not been the immediate economic disaster we expected. Even the most hardened economic commentators are scaling back the likely damage tariffs will do to the economy in terms of triggering a recession. The short-term pain will be milder than feared, although the long-term consequences for the US in terms of global markets could be far more damaging.

Core MAGA voters may still believe Trump’s done a great job – despite them thinking he’s been captured by the deep state over Epstein.

However, the remaining 75% of voters, including the swing electors who enabled Trump’s victory, are increasingly anxious on the economy. Trump has rained them in promises, but nothing really has changed in terms of wages, while inflation, rents and inflation are all edging higher. Trump has 18 months before the Mid-Term elections to pay his political debt to them.

And just where are the Democrats? One of the oldest mantras in the game of conflict and politics is “never distract your enemy while they are making mistakes.” I’d like to think that’s what the Democrat’s have been doing since Kamala Harris was defeated at the polls last November. They’ve let Trump rant, rave and left his multiple egregious behaviours unchallenged. But probably not – looking at what passes for Democrat leadership these days…. They seem even less present than President Biden ever was..

Out of time, have a great weekend, and off to do the day job…

Bill Blain

Author, The Morning Porridge

CEO Windshift Capital

Partner Shard Capital