Making Sense of Stocks in Trump's Trade World

 | Jun 11, 2018 | 6:13 AM EDT
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We don't know how to relate to it, because we have never seen anything like it before. As people struggle to figure out President Donald Trump's next trade moves, we can't figure out how they will impact stocks. Before we figured when they go sour--the market should go down, and when they sound practical and peaceful--it should go up. But that's no longer the case.

What happened?

Let's go over the difficulties people are having relating stocks to this morass, and then let me give you some answers based on my reporting on the situation.

1. Is this the end of G-7 as we know it?

We can't figure out what it means to anger leaders thought to be allies to the point where they have to respond negatively. Does he want to end the G-7? Isn't that a natural outcome of his actions?

Hypothesis: Yes, the president doesn't really care for any of these leaders because he feels that they have been supported long enough by the U.S. and there is no longer a threat out there that needs to be met with military might.

Many of these relationships were created to meet the bipolar U.S. Soviet threat, which is no longer relevant. Now, not only is it no longer a threat, but Trump can't figure out whether Trump or Merkel is at fault for Ukraine. So he wants Russia back in. Trump thinks the Russians can do more to help us than the Germans and they won't try to take advantage of our low tariffs. They aren't taking away our jobs with BMWs and Mercedes. They could even work to keep oil down. They can be better friends. What can the Germans do for us? Nothing. Yes, that is how he thinks.

Plus, he hates the idea of any sort of power equivalence. He can't stand Canadian Prime Minister Justin Trudeau because, in his mind, Canada's not much of a country to begin with. In Trump's world, Lilliputians do not get to win.

2. Why does Trump allow such chaos to emanate from the White House on China?

Hypothesis: When I was a judge on the Apprentice, Trump frequently--and needlessly-tried to pit one contestant against another in a way that he thought produced the best results. Then he would fire the loser, but not after tremendous angst about it because he always felt badly about the firing.

He regarded the show as a magnificent success. So, he regards this method as a great success, too. He doesn't look at it the way we do. We are not trying to win the Nielsen's overnight ratings, as he was back then. Nor are we trying to win the 2020 election race as he is right now.

So we are looking at it with the wrong lens. Contestant Steven Mnuchin and Contestant Peter Navarro have hung on for a while. Contestant Gary Cohn was fired real early. Contestant Larry Kudlow is moving up rapidly. People trying to relate this reality show to stocks are being way too serious: not about the stock market, but about the White House.

3. What is the endgame with China?

Hypothesis: This is really about intellectual property and the only way to anger the Chinese to the point where the give up and just totally remove themselves from any possibility of trade cooperation is to ban ANY investment by the Chinese into the U.S. That will most likely happen by the end of the month. That's right, I think that by the end of the month China won't be allowed to buy any U.S. companies of any size.

4. What is the endgame with the Germans?

Hypothesis: To me that's all about ultimately blocking the import of their cars into the U.S. I know that it seems impossible to regulate, but, believe me, he may just say that you have to pay 10% more for a Mercedes or a BMW if the majority of it is NOT made here. NAFTA will not protect it.

5. How does all of this not crater the stock market?

Hypothesis: Anytime the stock market is really about to roll over, Trump will walk things back a bit and send out Larry Kudlow to say that he is an optimist and all will be fine. Trump enjoys keeping his allies, his friends, his enemies and even the stock market off balance.

This is his chaos-induced world and welcome to it whether you voted for him or not.

6. Can it really be this simple and simplistic?

Hypothesis: Yes.

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