You can only get negative for so long on the same stories. We've been negative because of Trump, trade and tariffs - but today we decided: "Enough already. Let's do some bargain hunting just in case one of these negatives turns positive."
Let's hit these three negatives one by one:
Love him or hate him, President Donald Trump is too much in the news in ways you don't want your president to be in.
You don't want to have to wake up every morning and say: "OK, let me see what the special counsel might be working on today." Given that special counsel Robert Mueller is way too discreet to actually leak --that's right, he hasn't and he won't -- that's always a giant guessing game.
The Trump/Russia indictments, the arrests, the documents -- they all read bad about everything Trump might or might not have done, and it wears on you if you own stocks. You end up yearning for last year, when the president was in the news for all sorts of things, but not for what happened with the Russians or a female accuser.
You want these headlines to go away, but they won't. So, the stock market (which collectively likes Trump) has become a referendum on what piece of paper or indictment or firing will come next. And on how to fit it all into stock prices that should have nothing to do with the president at all.
In short, the president's woes make you want to pay less for stocks. All stocks. The stories have become an albatross around every investor's neck -- whether you love Trump, hate Trump or don't even care.
Investors are conditioned to believe that tariffs are bad -- they cause trade wars, and trade wars are bad for business.
But Trump is not Mr. Stock Market in Chief, he's the president of the United States. And he feels strongly that many of our trading partners have gotten the best of America because presidents before him were either too timid or charitable to other countries at the expense of our own workforce and intellectual property. Also remember that this view -- particularly as it relates to China -- was one reason why Trump got elected in 2016.
Again, you might not care for Trump, but he's been pretty much methodical about following the agenda that got him into the White House. He wanted to repeal and replace Obamacare but failed, but then he wanted tax reform and succeeded.
That was a windfall for many U.S. businesses -- both domestic because of a much-lower corporate tax rate, and multinational because they could repatriate capital. That's something that some of the biggest and the best corporations -- like Amgen (AMGN) , Cisco (CSCO) and Microsoft (MSFT) -- have used to their advantage through monster buybacks.
But now it's time for Trump to make good on his last big campaign promise other than bringing drug prices down. He's going to rearrange the relationships we have with our trading partners, most of whom he doesn't think are "partners" at all, but more like "stealers."
Because many people in old industrial towns believe that globalism and world trade have stolen their jobs, this is a wildly popular view among many Americans. However, it's not popular among the stockholder classes.
In this way, President Trump has become (hold your ears) kind of shockingly like former President Barack Obama. Neither seem to care much about the stock market.
Now, this view snuck up on investors, who became conditioned to think that the Dow Jones Industrial Average was a referendum on how Trump was doing. It worked -- especially well when he wasn't doing so hot in the polls.
But now some polls show Trump is becoming popular, and he's hearing talk that he could get a Nobel Peace Prize for bringing North and South Korea together. (That is, if it happens.) With all of that, who cares about the stock market?
So, the president is trying to right what he perceives as the wrongs of a whole hoard of past presidents. He thinks they either cared more about other countries' workers and standards of living or wanted to open up foreign markets to U.S. multinational companies.
Of course, there's also the other benefit of trade -- cheaper products made overseas and sold here - that's been a fantastic thing for America's working class. But that's not on the table.
So, Trump has sent a trade delegation over to China to right past wrongs and get a better deal -- one of three key trade initiatives of his. (The other two are renegotiating the North American Free Trade Agreement and lowering European trade barriers to our goods.)
The third "T" - trade -- is a function of what's happening with tariffs.
A big part of Wall Street's rally at 2018's beginning came about in response to "synchronized global expansion." Remember that?
Well, the numbers don't look so hot any more. March is looking like it was a weak month, while April seems even more punk --something that we'll get our first glimpse of when we see the U.S. nonfarm payrolls report Friday morning.
Because trade has slowed noticeably (particularly in Europe), the "Big Global Expansion" thesis is blowing up right before our eyes. If this week's U.S.-Chinese trade talks don't work out, that will just be another nail in the coffin of the world-expansion theory.
But remember, the president's advisers have said that we'll have to take some pain to right the wrongs of previous presidents. And to twist a phrase from my fave My Fair Lady, "the pain stays mainly on the market."
The Bottom Line
You want to tie it all in? Well, the new thesis I'm hearing is that Trump's woes are making the Chinese more intransigent. They're supposedly taking a longer view that he's in real trouble and that they can take more pain than we can -- which means global expansion could get sidelined because of Trump's troubles.
Now, this narrative has become so ingrained that we now know that every stock goes down whenever it's repeated. We'd like to think companies that have little to do with international trade could somehow be immune, but if they're in the S&P 500, they go down.
Did you ever notice the red on the board on big down days, when the selling is two- or three-to-one on the downside? The red blankets anything that's in the S&P 500 because big hedge funds and small investors alike are now conditioned to buy index funds.
So, all stocks get tosses around like flotsam and jetsam on the high seas of Trump, tariffs and trade. It's the "Three Ts," and each one devastates what we'll pay for any stock, regardless of its origin.
Now as negative as that story line is, we periodically get bargain hunters who come in and basically say: "Enough already, it can't be this bad."
Perhaps there will be no negative headlines about Trump on Friday. if that's even possible any more. Or maybe we'll see National Economic Council Director Larry Kudlow pop out of a meeting with the Chinese with a thumbs-up and say there's reason to be optimistic a deal will get done.
Maybe China will decide that it has more to lose than we do and agree to shutter half of its steel mills. (Perhaps the ones that spew out so much pollution that too many Chinese are dying of respiratory illnesses to make it worthwhile to maintain the jobs these plants engender.)
Or maybe it will just be another lousy Friday like all of the rest of them, and those who buy will get walloped -- which is why market's recent big bounce couldn't be sustained.
Still, if you have one takeaway from Thursday's market action, it should be that there comes a point where everyone is collectively too negative for a moment. And that's when you have to take the other side of the trade.