MARKET CALL: Follow The Bouncing POTUS

In our December 17 Morning Briefing, we wrote: "With bullishness abounding, contrarian indicators are flashing red, and we see the potential for a market correction early next year." Our major concern was that the stock market's bulls were discounting too many cuts in the federal funds rate this year, while the bond market's bears were signaling that the Fed had already cut the rate by too much. In addition, we expected some choppiness in stock prices during the first half of the year until there was more clarity on the economic impact of Trump 2.0.

President Donald Trump's Nitro Tariffs (TNT) turned out to be the main drivers of the 18.9% correction in the S&P 500 from February 19 through April 8. Most of that drop (12.3ppts) occurred during the two days after April 2, which Trump declared was "Liberation Day," when he imposed draconian reciprocal tariffs on 60 countries. We did not believe that day might mark the end of the correction as some market watchers expected.