The World Is Not Enough!
Investors learned this week the only thing more chilling than a James Bond villain is a James Bond villain who does not feel pain
Others will disagree, but let me stipulate from the start that it would be wrong to compare Donald Trump to any of the James Bond villains, whether Dr. No or Lyutsifer Safin or any in between.
And yet…
There’s an alarming similarity we discovered this week between America’s president and Renard, the nemesis from The World Is Not Enough, a respectable entry in the Bond canon that centers on a plot to drive up global petroleum prices through a nuclear meltdown in Istanbul’s Bosphorus waters. No, it’s not that Renard is an ex-KGB agent, turned terrorist. It’s that, due to a bullet lodged in his brain, he feels no pain.
Investors who were enthusiastic about a Trump victory last November embraced the prospect of lower taxes and fewer regulations, assuming that his campaign rhetoric on tariffs was, well, campaign rhetoric. Tariffs are never the ideal answer for anyone with market instincts, but the thinking went that a few surcharges on imports here and there might be politically necessary when so many Americans think the system is rigged against them.
And besides, tariffs were relatively moderate in Trump’s first term.
And a financial guru like Treasury Secretary Scott Bessent would help discipline the president’s exuberant decisionmaking style.
Oh, and surely, a president who talks about the Dow Jones Industrials Average like a report card on his record wouldn’t do anything to rattle markets too much.
And if nothing else, he definitely wouldn’t want to take the blame for triggering a recession.
And yet…
What’s so chilling about Trump’s latest comments is just how relaxed he seems about the current ongoing financial gyrations. “Markets are going to go up and they’re going to go down but, you know what, we have to rebuild our country,” the president said on Tuesday.
Still worse he and his team let it be known they aren’t spooked by talk of rising recession risks either. That very same Treasury Secretary, whose central job is to keep the economy humming, started saying crazy things about the importance of a period of “detox” to restore America’s industrial health.
No one had priced this in, because the basic assumption was always that, for all the mysteries around what motivates Donald Trump, there was a firm assumption that he would respond to feedback like the rest of us. Sure, he may be less sensitive to opinion polls, since we don’t (really) believe he can amend the Constitution to secure a third term. But there was widespread agreement he would stop doing what he was doing if he thought it hurt the Dow.
But now we discover that in addition to all his other powers, the president doesn’t feel pain!
With a compliant Congress, there’s nothing to stop him from delivering his maximum tariff visions. With a Supreme Court that seems ill-disposed to question presidential authority, he looks free to impose any tariff on any industry at any time.
We just may have to live with 25% tariffs on everything!
And if the first two months are any indication, it will be worse than any actual “detox” program because it won’t be structured, transparent or finite.
But, of course, the president isn’t really a Bond villain and he feels pain like the rest of us. He’ll change course if the market swoon continues. He won’t deliberately trigger a recession that consigns Republicans to midterm electoral disaster.
And yet…
The markets have realized that the strike price of the Trump put is much lower than appreciated.