I know I should be talking about bond yields and inflation risks, but sometimes we have to stop and listen to the noise. When our idols say, do and enact stupid things there are always consequences. I know I should be talking about bond yields and inflation risks, but sometimes we have to stop and listen to the noise. Trump, Musk and Bill Winters. When our idols say, do and enact stupid things there are always consequences. This is a market perhaps too focused on the personalities, and not enough on the realities.

Trump has shattered conventions on politics and diplomacy so why not financial markets as well? The Show Trial of Jerome Powell will see Trump seize the levers of monetary policy. For markets its dead simple – what will it mean for the economy and the rising prospects of a Stagflationary Bust in the US?

Never has the contrast in economic outlook and market expectations been so divided on either side of the pond. In Washington, joy as Trump’s tax cuts are enacted. In London, unremitting gloom and despair. But, hey-ho, Labour is going to fix the NHS! Give me strength….

Content with his supposed win in the Tariff Wars, now Trump is rooting out internal dissent – Harvard being top of his list of target institutions. What next? US Risks are rising and are still not fully reflected in stock or bond prices. Peak Trump is a long way down the road – till then things may get worse.

The irresistible force of Trump has hit the immovable rock of Economic and Market Reality. The inconsistencies of Trump’s tariff policies - the centre-plank of his economic understanding - have been exposed as bogus. It begs the question – What Next? Which is why markets are braced for even more dislocation.

Trump’s supporters think he just played a blinder of masterstroke reversing tariffs. Those of us with clearer minds and an understanding of finance know the truth – Trump lost. The bond market punched him hard between the eyes.

The Trump Presidency is not short of surprises. It will generate all kinds of consequences. The first is we’re approaching Peak-Musk. Expect to see the battle between Musk and Sam Altman of OpenAI get brutal. That Trump is transactional is no surprise, but how will supporters consider his meme-coin monetisation of power?

Yesterday is done and dusted. What counts is what happens next! Markets will move on from the election and return to pricing real events and their consequences. The first 100 days will be no honeymoon. Get set for “interesting” market moves, events and plenty of volatility.

 Trump’s inauguration will come and go. Lots of noise, 100 executive orders. No doubt we will be shocked. Then everything will settle and we will focus on the US/China Relationship and the US Treasury Market. The UK will be left wondering what, if anything, the “special relationship” now means.

Blain’s Morning Porridge Jan 15th 2025: What happens next? Brave [...]