Welcome to Liberation Day: Buckle Up, It’s Just a Rest Stop

Today’s tariff milestone feels like Cadillac Ranch—a memorable stop, but nowhere near the end of the journey.

KEY TAKEAWAYS

• Today’s “Liberation Day” is a milestone in the tariff saga, but not the end.
• Corporate data is showing cracks: falling capital investment, hiring slowdowns, rising input costs.
• Consumer confidence and spending are already weakening—now business confidence is too.
• Markets still face uncertainty, and the economy may be slowing even without a formal recession.
• “Autarky” sounds noble but is inefficient—reshoring has economic limits.

MY HOT TAKES

• Today’s trade announcement is more theater than transformation.
• Market clarity is a myth—this is a detour, not a destination.
• The PMI data reveals deeper concerns than tariffs alone.
• The Administration’s reshoring dreams run counter to economic efficiency.
• The real danger isn’t a recession—it’s a slow grind that drains investor returns.
• You can quote me: “Today will certainly mark a milestone in that process… but will it be the liberation of dollars from our 401ks and wallets in years to come?”

Are we there yet? Well, we finally made it to the President’s self-coined “Liberation Day,” and unlike Independence Day, today is NOT a market holiday. No. Markets have been debating the Administration’s tariff / trade war strategy since about two days after the President was inaugurated on January 20th and today will certainly mark a milestone in that process. Today, we will learn whether “liberation” refers to liberation from the oppressive trade policies of the US’s trade partners and the trade deficit, or the liberation of dollars from our 401ks and wallets in years to come.

Many have been calling today a “clearing” event. Markets have obviously been distressed over the growing pile of unknowns around the details of the President’s promised sea change. I have referred to it as a fog of uncertainty which is preventing markets from getting anywhere fast, and we all know that the markets are allergic to just the slight hint of it. But will it be a clearing event? Will markets reward the event with a “thank you, next,” then get back to business? Getting back to business would mean returning to the neat uptrend in stocks and strong economy that existed prior to President Trump’s inauguration. 

We will certainly have more tangible information by COB today, but will it be enough? Unfortunately, my friends, I am afraid that today is simply a rest stop on a long and bumpy stretch of highway. Think of it as a stop at the Cadillac Ranch or the Midpoint Cafe on the US’s iconic Route 66. You know, that famous 2,500-mile road that winds across 8 states from Chicago to California’s Santa Monica Pier. There are numerous picture-ready landmarks that dot the highway, serving as waypoints in an otherwise long and boring trip. You might look forward to Cadillac Ranch. It has appeared in countless pictures and movies and even has a Bruce Springsteen song written about it. It is around mile marker 1,390. You could stop and snap a few selfies in front of the half-buried Cadillacs, but your excitement would quickly die down once you returned to your car only to realize that you still had to get through the rest of Texas, New Mexico, Arizona and a bit of California to get to the pier in Santa Monica–some 1,100 miles.

So, if you are following my analogy, today may be a memorable milestone, but this trip of tariffs and trade wars is far from over. The discourse around those has largely been all the unknowns and the bluster–all important things, however they have been a dangerous diversion for corporate management and investors. Can you tell that I am setting you up for the second half of the journey?

That’s right. Let’s focus on the economy for a moment, because there are warning signs flashing all over the place. I have written numerous times about the decay in consumer confidence–BAD, the increase in inflation expectations–BAD, and the brake-pump on consumption–really BAD. Yesterday, we got another clear warning sign, but this one came from a different component than consumption. This warning came from corporations in the ISM Manufacturing PMI. I like to think of it as the corporate equivalent to consumer confidence, let’s call it corporate confidence.

Remember, GDP is made up of Consumption (C), Capital Investment (I), and Government (G) spending. I, as you know, am obsessed with Consumption because it makes up ~70% of GDP. But capital investment, largely driven by businesses, makes up another almost 20%. Yesterday’s ISM figure missed estimates, coming in below 50, which means it is contracting. Though not good, the headline figure wasn’t the real story. That came in the secondary data points which showed that companies are pulling back on capital expenditures, slowing down on hiring, and that their input prices were on the rise. Folks, that is a trifecta of–I am trying to figure out a nice way of saying-well, you know 💩. 

Now, even though corporate investing does not contribute the lion’s share of input to GDP, everything starts there, so it is, in some ways, even more important than consumption. If companies start to curtail hiring and increase job cuts, it is a catalyst for a pullback in consumption. People without jobs and employed folks worried about theirs spend less. It’s not rocket science; it’s just basic psychology. So, companies cut back on capital expenditures ❌, companies slow down hiring and increase layoffs, which lead to lower confidence and ultimately lower consumer spending, ❌❌. I am not going to waste time on Government spending, but we know that it is more likely to go down than up. 

What I just painted for you is a picture of a potentially weakening economy in case you missed it. The message for investors here is that we must now not only contend with all the uncertainty surrounding tariffs, but we must also now consider the increasing possibility of economic fallout. Though blue-chip economists are only expecting a 30% chance of recession in the next 12 months, you don’t have to have a recession to expect challenges in your portfolio. Recession is just a word. A weakened economy is challenging for all companies. With earnings season just days away, we will surely get more color on how companies have already changed their habits and what the impacts of the recent trade climate might be going forward.

Finally, I want to conclude with the word of the day which I shared with Frank Holland on CNBC this morning. The word is Autarky. I explained that it is a fancy economic term for “eating your own dog food.” It is an economic term for a nation aiming to be completely self-sufficient. An appropriate word for “Independence Day,” I explained. While the goal of these recent tariffs isn’t always clear, reshoring manufacturing remains the Administration’s favorite talking point. And while it sounds noble, most economists agree it’s inefficient and ignores the concept of comparative advantage—that is, the idea that some countries are just better at producing certain things. Mexico grows avocados more efficiently. Canada produces aluminum more cheaply, thanks to low electricity costs (see yesterday’s blog post for more on that here). Autarkies sound wholesome and patriotic, but they are unsustainable in a profit-driven, capitalist society. There is, of course, lots of debate around this. However, if you are unsure, just look at North Korea, it is an Autarky. Mic drop. 🎤

Don’t get distracted, keep your eyes on the road, hands on the wheel, and seatbelt tightly fastened. We still have several states, lots more road to cover, and surely there are bound to be more bumps and bad weather along the way. 

YESTERDAY’S MARKETS

Traders mustered every ounce of optimism in yesterday’s session as they boosted indexes to a mixed close. The bull case was made on the potential for the President to come up with a more benign tariff package than expected as well as hopes that simply knowing may remove some volatility in equities. Treasuries advanced bringing down yields showing that bond traders called bull on the bull case.

NEXT UP

• ADP Employment Change (March) is expected to show that 120k new jobs were created last month, marking a rise over February's 77k new hires.
• Factory Orders (February) may have inched higher by 0.5% after climbing by 1.7% in the prior period.
• A “Liberation Day” celebration will be conducted in the White House Rose Garden this afternoon at 3:00 PM Wall Street time. That gives the markets 1 hour to react to the news–it should be interesting.
• Fed Governor Adriana Kugler will speak today.

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