Here is something  on which the Partners at WCM do not agree. We have a diversity of views as to the merits of punitive tariffs and the possibility of a trade conflict if not a full-on trade war. There is an extraordinary amount of complexity in the system, and as a consequence no clear, straight line of causality. Raising steel and aluminum tariffs could help to revitalize US industry and jobs, or it could raise input costs for infrastructure companies, auto and plane manufacturers, commercial builders, etc. Those tariffs could spark domestic activity, or it could kill jobs and mute the stimulative effects of the recently legislated tax cuts. Our disagreement is fine. That reflects the realities of the country and the economy, and therefore the markets in which we operate. Economists, analysts, academics, business leaders, pundits, policymakers, politicians, and the press all have hot takes on what this does and could mean, but nobody knows, including us.

Gary Cohn rode Hope Hicks’ wake out of the White House yesterday, and with him the hope globalists would continue to have a policy voice in the Executive. We assume though that Trump — industrialist, builder, businessman, negotiator — is still plugged in to many of his partners and patrons across the US economy and those voices will continue to be heard through more informal channels. The rhetoric and the reality will have to come into line before any real steps are taken. Canada, not China, is our largest trading partner on steel, and the US maintains a trade surplus across our Northern frontier. [Many relevant statistics can be found on the website of the Office of the US Trade Representative, including the specifics for Canada. ]

The long term effects of tit-for-tat tariffs with our trading partners are tough to predict. But, the near term reality is that this is one more element of uncertainty over which the market broods. Trump’s initial remarks uncorked another episode of volatility, and just as the market shrugged that off Mr. Cohn’s official departure set us back again. However, after trading across a range of about 1% for the S&P500, US markets more or less closed where they finished in the innocent before-time when Gary Cohn was still chief economic advisor to the President… yesterday.

Nothing has actually happened. Yet. We expect the market will continue to gyrate around each whisper and supposition about what comes next. At some point the White House will or will not follow through on the rhetoric. Perhaps they act or perhaps this is a negotiating tactic to set the table for NAFTA and other trade conversations. Once we get some clarity the market will handicap the possible outcomes and price them accordingly. But for now, it seems likely that what we will experience is volatility that keeps bringing us back to where we started since there is no new information to price.