Uncertainty Has Become a Cliché

Since our call for a correction three weeks ago shortly after all-time highs for stocks, our diagnosis of unbearable uncertainty has become in-consensus to the point of cliche. A 10.5% correction in stocks builds in a comfortable risk premium from which we can "wait and see." Likely the worst is over. Trump has threatened more tariffs than he has implemented, suggesting they are ploys in a larger agenda. With Miran confirmed now at CEA, we may be about to see what that is. Consumer confidence has fallen sharply and small business confidence has dipped a little. But Trump’s approval ratings remain strong, perhaps the key public confidence indicator. This has driven Schumer to concede on the GOP continuing resolution to prevent a shutdown, and points the way to GOP unity in quickly extending, or even deepening, the expiring 2017 tax cuts. S&P 500 365 days-ahead forward earnings have recovered from their slump and have moved to all-time highs, with or without the Magnificent Seven. Jobs and inflation data are constructive. Consumer inflation expectations have jumped, but it is due to the least-sophisticated demographics. The FOMC will do nothing with rates on Wednesday, but will likely lower its "dot" for year-end 2025 by 25 bp, building in one more rate cut for the year.