Inflation has been *the* key economic issue across the globe ever since the 2020 pandemic shock. Incumbents around the world lost their elections in 2024, and the lone commonality among all of them seems to be that they were in charge when inflation rose, echoing a trend seen throughout history. This has led to a financial market laser-focused on inflation, as whether it is trending up or down is basically the whole ballgame that influences whether markets are bullish or bearish.
The latest inflation reading from March is good news. Great, even. Consumer prices declined month-over-month for the first time in five years. Inflation readings beat expectations, as year-over-year inflation cooled to 2.4 percent, coming in under the 2.6 percent analysts priced in. If Kamala Harris had won and continued the policies of Joe Biden like she promised, the market would undoubtedly be up today.
As I write this, the S&P 500 is down over five percent and is flirting with rushing down seven percent where it would trigger the circuit breakers where trading is halted for 15 minutes.
Why? Because the market is not laser focused on inflation as the chief threat to the global economy, and instead that chief threat is now the president of the United States. Yesterday’s utterly insane market rally off the back of the bond market Illuminati bullying Trump into announcing a 90-day delay is already ancient history. The market yesterday seemingly focused all its energy on the delay, and today it is reading the fine print where tariffs on the engine of global trade rose to 125 percent and total tariffs on Americans actually went up once you weight them by imports. Furthering today’s market rout is undoubtedly news that the White House said tariffs on China are now 145 percent, not 125. This is madness.
Plus, slowing inflation is not necessarily a good thing. The main reason the market is ignoring this good news today is that it comes from a previous era where America’s aspiring autocrat wasn’t devoting all his time to obliterating the global economy. The drop in March inflation is widely expected to be a blip in its inevitable rise due to Trump’s tariffs, but Trump’s tariffs have now made falling inflation a real fear too over a longer timeline.
Inflation is directly connected to economic growth. In a way it is economic growth. You don’t want zero or negative inflation because that’s what the Great Depression looked like. The Federal Reserve targets two percent inflation as their healthy amount of it, as the dynamic of this core economic indicator is like Goldilocks in that you don’t want it running too hot or too cold, but just right. Trump’s tariffs seriously threaten inflation in both directions, and so one interpretation of a lower-than-expected inflation reading is that firms are pulling back from investment due to Trump’s tariffs creating vast uncertainty in the economy. He has done what seemed unthinkable a few years ago, and turned the best inflation news in five years into potentially bad news.
Markets are clearly in deep distress right now. The bond selloff that forced Trump’s hand to delay the tariffs continued through yesterday and the long end bond selloff has picked back up today. Three of the last six trading days have seen the market gap up or down at the open, a distressing sign that volatility is wrecking leveraged positions, and the VIX, the market’s shit hitting the fan indicator, is spiking again today and currently sitting at levels just underneath where it skyrocketed to during the 2008 and 2020 financial crises.
VIX basically at its 4th highest level ever right now. Things are breaking.
[image or embed]
— Jacob Weindling (@jakeweindling.bsky.social) April 10, 2025 at 10:32 AM
Every day since Trump fundamentally changed the American economy forever, a systemic financial crisis has seemed more likely than the previous day. The market’s astonishing nine percent gain yesterday does have precedent, but you have to look at generational financial crises to find it.
Chart via Wikipedia
Healthy markets do not move this much in both directions. It is a far better signal for the S&P 500 to gain nine percent over the course of a couple months than in a single day. The world is moving at a million miles per hour these days, making it nearly impossible to predict what awaits us around the corner, but the market is giving crystal clear signals that the overwhelming favorite is that it’s nothing good.
GET SPLINTER RIGHT IN YOUR INBOX
The Truth Hurts
