The smart financial minds have been predicting what is taking place as we speak on the New York Stock Exchange. Jonathan Last of the Bulwark sent out his Monday newsletter last night because it was a prediction of how the markets would put a stop to Trump’s tariff madness jimmy pronto. And lo, what Last said is coming to pass this Monday morning. As you may recall, the Dow Jones plunged on Friday and the market closed at 4:00 p.m. as a safeguard. Here’s what’s going on now.
He is the “best” at that … 🤡👍 pic.twitter.com/4x1a4GNvWx
— Sean McDaniel (@Delerat7) February 3, 2025
Welcome to the Golden Age of Dipshittery. pic.twitter.com/R7lt4XGboG
— Ron Filipkowski (@RonFilipkowski) February 3, 2025
This is what is going on in real time. Now on to Last’s prediction.
When the New York Stock Exchange opens on Monday at 9:30 a.m. we will see just how seriously the world takes the assault Elon Musk and Donald Trump launched on the American system of government.
What follows is a guide for interpreting the drop.
First, some ground rules. The securities markets have a system of circuit breakers to halt massive declines. There are three circuit breakers that are measured by calculating a percentage decline in the S&P 500 from the close of the previous day: Level 1 (7 percent), Level 2 (13 percent), and Level 3 (20 percent). If Levels 1 or 2 are tripped before 3:25 p.m., all trading is halted for 15 minutes. If Level 3 is tripped at any point in the day, trading is halted for the remainder of the day.
Last Friday the S&P closed at 6,041. Trading ended at 4:00 p.m., per the norm, but at 1:15 p.m. a selloff started when reports of Trump’s proposed tariffs against Canada and Mexico hit the wires. In less than three hours, the S&P lost 1.1 percent from its daily high. […]
The answer to that question [how far the market drops today] will tell us what the markets believe about Musk’s and Trump’s intentions. Here are four scenarios:
(1) Drop is < 5 percent: The markets do not believe that Trump’s tariffs on Mexico and Canada are likely to remain in place. Nor are they especially concerned by the reports of turmoil in Washington over the weekend. They basically believe everything is normal and that Trump will quickly revert to par, allowing the broader economy to continue more or less as normal.
(2) Drop is 5 percent to 7 percent: The markets are concerned that Trump’s tariffs will impact the American economy in the near term and that this movement could trigger broader recessionary risks. They believe that Trump might be responsive to market pressure, but they aren’t sold on this hope.
The markets are focusing all of their attention on the tariffs—trying to divine how long they’ll be in place and what the magnitude of the damage will be. They haven’t begun to process what went down at Treasury over the weekend.
Though no one is ready to start speculating on just what this land of bad might look like.
(4) Drop is > 9 percent: A selloff of this magnitude would suggest absolute panic at the worst level in living memory. (Other than COVID and the 2008 financial crisis, you’d have to go back to the crash of 1987 to find an analogue.)
At this level, the market is signaling that it has no confidence in the near-to-medium-term American economy and cannot even begin to price the tail risk.
We’re going to have to just watch. The market has been open around an hour and a half at the time of this writing and initial reports are what I have shared above. And I can also share with you that Great Depression is trending because tariffs are what got us into that mess back in the 1920’s. Trump tells this fairy tale how under William McKinley the country was uber rich and they got that way from tariffs — bullshit. A hundred people or so became insanely rich and everybody else hurt. And then came the Depression, with masters of finance, masters of the universe, either shooting themselves or leaping from the towers of finance. Everybody else was in Hoovervilles and bread lines.
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