Trump playing hardball, not kamikaze economics?

Equities delivered a mixed bag, with Asian shares posting their sharpest decline in a week while US and European futures edged higher. Meanwhile, the DXY climbed, fueled by stronger wage growth and rising inflation expectations—both exacerbated by fresh tariff concerns, which have now pushed swaps markets to price in just one Fed rate cut for the year.

That said, this morning's subtle bounce in major US and EU equity futures suggests that traders still view Trump as the "Deal Maker in Chief." The prevailing market narrative? Tariff threats are just another bargaining chip. Investors are betting that Trump, ever-conscious of the S&P 500 as his economic scorecard, won’t let trade tensions spiral out of control. For now, the “buy-the-dip” mentality remains intact—but that could shift quickly if markets start to believe these tariff moves are more than just negotiation tactics.

Market participants have been branding Trump 2.0 as the "Deal Maker in Chief," and US stock markets are still operating under the assumption that his tariff threats are ultimately negotiation tactics aimed at extracting better trade terms rather than outright economic warfare. Even as we acknowledge the extreme tariff tail risks—which is why we look to remain hedged through dollar longs against CNH and EUR ( although we booked profits this morning ) —we also recognize, on the reciprocal tariff front, that many countries will likely preemptively adjust their tariff structures to stay in Washington’s good graces.

Expect cuts in customs duties on high-profile U.S. exports, particularly Red State products like agricultural goods and automobiles. Policymakers are attempting to neutralize Trump’s protectionist instincts before they escalate into full-blown trade wars.

But traders are also keenly aware of the logistical nightmare of enforcement. As we noted in our weekend “Reciprocal Tariff Primer,” implementing and tracking a customized tariff schedule for each country would cripple the U.S. trade system. The bureaucratic cost and infrastructure overhaul needed to enforce these measures could far exceed the revenue from the tariffs. At some point, the math stops adding up, and that’s where the market is pricing in moderation from Trump, knowing that even a tariff-heavy administration has to weigh the cost-benefit equation.

In short, markets see Trump playing hardball, not kamikaze economics—but if that perception changes, expect a much sharper repricing of risk across assets.

Typically, in the wake of of any NFP prints, I’d have a solid read on how to trade today’s FX market and a clear sense of where my risks lie. But with markets reacting more to Trump’s policy shifts than macro fundamentals, there’s no real playbook—just volatility on tap. I wish I had a crystal ball to predict Trump’s next move, but since I don’t, I’ll wait for New York to set the tone and straddle both EUR/USD and the S&P 500.

When the market's direction is murky, I prefer to stay nimble and hedge both ways rather than take an outright directional bet. It’s a risk-on/risk-off tug-of-war, and until we get clearer signals, the best strategy is to let the market dictate the next steps rather than forcing a trade. Patience is also a position.

Why it will get tougher to trade

When you trade for a living, you need an outlet—something to break the cycle and avoid falling into the dreaded eat, sleep, rinse, repeat routine. Trying to keep pace with Trump is a different beast entirely. He’s unpredictable, constantly shifting gears, and—let’s be honest—he's up 18 or 19 hours a day, making it virtually impossible to stay ahead of him. You might catch up for a moment, think you've got the next move mapped out, and then boom—he flips the script again. It's relentless.

That’s why having a way to clear your head is non-negotiable. Whether it’s a long run, deep dive into market trends, or just stepping away from the screens, you must break the cycle. Because if you don’t, the game will chew you up and spit you out before you even realize you’re stuck in the loop. I did a long run this morning at 3 AM, cut my weekend holds at the market open, flipped the profits into gold and watched the Super Bowl. The sun will always shine tomorrow.