Trending On Livewire: Weekend Edition - Saturday 12th April

What a week! You just saw the best aspects of markets compressed into 5 trading days. Dynamic pricing of risk plus asset price discovery in real time – the flow of capital across stocks, bonds, currencies, gold, and even crypto – flitting back and forth at times between the ultimate risk-free leveller, cash. I love the smell of markets in the morning!
Unfortunately, we also saw some of the worst aspects of markets. How an individual could be solely responsible for setting the market’s agenda – and for disrupting the market’s core functions of risk and asset price discovery.
Love him or loathe him, President Trump was right where he likes to be this week – the centre of attention.
No doubt you’re aware of last week’s Liberation Day “reciprocal” tariffs – they tanked markets – and as a result, this week were put on hold. This triggered double-digit gains in major US stock indices, including the second biggest on record for the Nasdaq Composite.
FYI, I’m ambivalent towards the man, or at least I was until this tweet on Wednesday:

This is NOT how markets are supposed to work. Markets are supposed to see risks coming, understand them, and set asset prices accordingly. Some risk managers* are better than others at doing this – and therefore, by right, they deserve the superior returns they earn.
As for risks, some appear and escalate quickly, for example COVID-19, and others more gradually, like the sub-prime debt crisis. I suggest they should not occur by social media!
The events of this week emphasise what you already knew, this is a volatile situation because we are dealing with a volatile individual. But that doesn’t mean his policies don’t have some merit.
I know entertaining this thought will upset many – it did – judging by the comments to the article I wrote this week in which I played devil’s advocate to the President’s trade policy. I contended there are several paths to several degrees of success – and no doubt any success will be seized on and claimed as a major victory.
One thing that comforts me as I contemplate this week, is that not even the most powerful man in the world could escape the consequences of the market doing its job: Pricing risk. Ultimately, Wednesday’s about-face occurred because the bond market was flagging how perilous risks to the global economy (and the US’s place in it) had become.
I wrote about these risks extensively in our Market Index Evening Wrap just 8 hours prior to Trump’s “Time to buy” tweet – not by luck – but by understanding the bond market is the first place all risk managers* must look to discharge their job of pricing risk.
Three asterisks next to the word “risk managers”? “Investors” is the more commonly used term – and that’s YOU. Your primary goal is to manage risk. So, make sure you’re doing it!

Which ASX sector do you think is most vulnerable to Trump’s latest policy shifts?

a) Resources
b) Financials
c) Technology
d) Consumer discretionary
e) None — it's mostly noise

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