Courtney and I have several Christmas traditions. On December 23rd at 5:00 p.m., we head off to Daunt Books in Marylebone. Despite being a chain, it's one of my favorite bookstores in London, and as you can imagine, it's jam-packed with Christmas shoppers, especially at that time, as it closes at 6:00 p.m. The plan is to buy ten books: three for me, three for her, and four that we both agree would be mutually interesting. Fiction or non-fiction, it doesn't matter. We potter around the store for about 45 minutes, collect our stash, and head across the street to an early-bird 6:15 p.m. reservation. We sit at the bar, share a bottle of wine, and go through the titles. Hands down, it's one of my favorite things that we do together.

Despite the crowds, the place is well-staffed with knowledgeable book nerds who are only too keen to take the time to discuss their opinions on the latest releases. Each year tends to have a theme. Last year, it was Palestine and Ukraine. Back in 2019, when we were discussing trends, the young guy helping us stated, without missing a beat, that this year was all about "Sharks and Nazis." Non-fiction authors, many of whom are journalists by training, tend to jump on a prevailing theme, and six years ago, Sharks and Nazis were apparently in vogue. I have very little doubt that by the time Christmas 2025 comes around, the shelves at Daunt, and every other bookstore, will be littered with the first of what will be dozens of titles about how Donald Trump attempted to upend globalization,

It has only been eleven days since April 2nd, the so-called Liberation Day, when in the mind of Donald Trump, a beleaguered, battered, and abused United States was going to take back what was rightfully theirs and right the wrongs of the global trading system. Each day seems to have brought a new chapter to the books that will hit the shelves by the end of the year. This announcement was based on good intentions but founded on fuzzy mathematics and dubious economics. A market calamity. A triple-digit tariff regime on China was immediately reciprocated. A US bond market on the verge of violent dislocation. A recanting of the policy and the fourth extension of the tariff plan in less than three months. Now, the latest is the exemption of iPhones, computer equipment, and chips, to the relief of long-term holders of Apple and a reprieve for Silicon Valley. Each day could be its own chapter, each theme a book unto itself. Journalists across the globe are speaking to publishers about writing books on this calamity. With apologies to the Shark and Nazi experts, there's going to be no room on the shelves for anything but Donald Trump and trade come the end of the year.

The reason there's so much interest in all of this is because this is not just a market correction. Donald Trump's schizophrenic trade policy affects Wall Street and Main Street with equal detriment. Global trade analysis, historically the domain of policy wonks, has become mainstream. It's equally problematic for portfolio managers trying to position the next capital allocation as it is for small and big companies alike, who are desperate to plan but cannot do so without knowing the framework. Ford has no idea how many cars it will sell in the United States in 2025 or 2026, and they have no clue what their costs are going to be. Small, family-owned companies that have relied on Chinese imports suddenly face an existential threat to their businesses and are scrambling to find alternatives. Angus has a friend whose mother oversees all of the global production of toys for McDonald's Happy Meals. Given their rigorous safety standards, they can't just flip the switch and find new suppliers. A Chinese tariff on McDonald's could cost tens of millions of dollars a year. For Happy Meal toys! I think it's safe to say that most of us underappreciate the breadth of local tariffs and the impact they will have not only on the US economy but on every small business on the planet.

It would be very easy for me to write another chapter to another book. Given everything investors have on their plates currently, I don't think you have the time nor the patience for long-winded reports. Frankly, without writing thousands of words, I cannot give this incredibly wide-ranging yet nuanced discussion enough detail. So, all I'm going to do today is give you the bullet points as I see them for the weeks ahead. Who knows, these notes may be the foundation of a book.

• The Trump administration's first round of tariff exemptions reveals a glaring absence of strategic coherence. The fact that timely lobbying can reshape policy highlights the transactional nature of this trade agenda. More exemptions are coming, reinforcing the notion that Trump's approach is about cutting ad hoc deals, not executing a grand strategy. Remember, it took two and a half years to finalize the Phase One trade deal between the US and China. The idea that the US could negotiate meaningful agreements with 75 countries in just 90 days is farcical. We are entering a prolonged cycle of headline-grabbing announcements, retractions, and exemptions that could stretch through the entirety of a second Trump term.

• Bilateral deals are the best result for asset prices. Whether that's driven by the incompetence of the rollout or by design, it takes the catastrophic outcome off the table. While we may have moved past peak corporate uncertainty, there's little doubt that both corporate and consumer confidence have taken an enormous hit, and an economic contraction is coming. The irony is that Donald Trump adopted this strategy to encourage manufacturing and capex back in the United States. However, the economic uncertainty of the past 11 days will slash investment budgets in the near term, and it's entirely conceivable that both foreign direct investment and domestic capex plans will fall sharply in the next 18 months.

• Removing Apple from global tariff pressures will underwrite the US equity market in the next couple of weeks. It is very difficult to see how the S&P can fall precipitously if the administration has given the largest constituent in the index a get-out-of-jail-free card. If the S&P and Nasdaq are supported because Apple is immune from major cost pressures, global equities will not fall, and volatility across asset markets will temporarily contract.

• That said, the uncertainty over corporate profits remains, and this will eventually lead to equities heading lower from May onwards. Long only equity investors will continue to sell into strength, as the lack of earnings visibility prompts continued de-risking. Over the medium term, investing in stocks is next to impossible without clarity on earnings. SPX will retest 5000 by the end of the quarter.

• Profit guidance is going to take a hit in the weeks ahead as US corporations take the opportunity in their Q1 earnings releases to guide the market lower in the face of enormous corporate and consumer uncertainty. The great advantage that companies have in the face of this sort of beta headwind for global equities is that there is no outsized punishment for revising down earnings expectations if everybody else is doing it at the same time. Quarterly earnings are all about expectation management and beating those expectations. Corporate America is going to lower the bar, and earnings revisions will continue to drive down expected 2025 earnings.

• China will not cave. China's exports to the United States account for just 2% of its GDP. Even if that figure drops to zero, Chinese GDP growth is still likely to remain positive. It's important to remember that China endured prolonged COVID lockdowns, two years longer than most of the world. The Chinese Communist Party has shown that it can manage adversity. In the face of renewed pressure, the Party's propaganda machine will go into overdrive, rallying the population around a familiar adversary: Donald Trump.

• While it's unlikely that China can fully offset lost US exports elsewhere, the renminbi (CNH) trading at an 18-year low signals a broader strategy: aggressive export expansion not just to Europe but, more crucially, across Asia. Asian markets are far more important to Chinese exporters than either the US or Europe. As a result, China's export-driven deflation will threaten corporate profitability not only in the West but also among its Asian rivals.

• US exceptionalism is dead for the time being. The USD will continue to weaken. While there is no liquid alternative to the US Treasury market as the ultimate safe haven asset, there will be continued talk about the selling of Treasuries and the idea of de-dollarization. This will lead to steeper yield curves, especially if the inflation data we witness in the next six weeks starts to deteriorate.

• Tariffs are bad for growth, and this will start to show up in the hard data in June. Between now and then, there will be a back and forth over whether soft data, inflation expectations, and consumer confidence morph into a pathway to recession.

• Currency markets are going to face the cross-current of a weaker USD as the world continues to reduce its decade-long overweight in US assets and Beijing's determination to weaken the CNH. Long Euro against both USD and CNH is the clearest trade in any asset class for the next six months, closely followed by shorting cyclical currencies like the Australian dollar versus the Euro. Simplify: long Euro versus everything.

In short, we have gone past peak negativity regarding tariff policy, but we now need to deal with the consequences of US-China decoupling, severely dented corporate and consumer confidence, and incredible uncertainty over the economic and corporate profit outlook. Market volatility may have peaked, but a retest of the lows by the end of June is conceivable on the back of revised earnings expectations, spiking consumer prices driven by Chinese tariffs, the prospect that ravaged soft data crystallizes into weakness in hard data, and a deteriorating consumer balance sheet. For speculative investors, equities and fixed-income trading will be incredibly difficult, with the clearest expression of the detrimental impacts of Trump's policy being generated in currency markets, especially long Euro vs the dollar and especially the CNH. The gold trend is clear, but commodities are also tough sledding.

Sell equities into strength and continue to lighten up on US assets versus the rest of the globe. International equities won't outperform as lower earnings expectations are a global phenomenon.

Stay defensive in front-end rates.