These aren’t normal times — It’s macro theater, and everyone forgot the script

Wall Street limped into Thursday’s close with a sigh, not a bang. Stocks went nowhere, the dollar steadied, and traders quietly hit the eject button ahead of a long weekend. Sure, the U.S.-Japan-Italy trade huddle offered a flicker of optimism — but Jerome Powell threw cold water on that fire fast. His message? The Fed’s hands are tied. Tariff-fueled inflation risk is real, and he’s not about to throw a lifeline to a market still bleeding from this week’s broad-based selloff.

Truth is, we’re in no man’s land. Most asset classes have drifted aimlessly post-drawdown, and while Trump is busy peddling “Art of the Deal” theatrics, few on the Street are biting. Not when ink hasn’t even hit paper with Tokyo. Japan may be a frictionless U.S. ally, but until the handshake moment, nobody is applying a litmus test to this narrative. The market’s learned its lesson — tariff policy from this White House is more scattergun than strategy.

And let’s not kid ourselves — the two-headed stagflation monster is still in the room. Powell ruled out playing rescue squad this week and took a swipe from Trump for his trouble. Meanwhile, Wall Street’s left waiting for something — anything — that looks like a credible thaw in U.S.-China relations or a Fed pivot. Pricing in a June cut is fine on paper, but if Powell's sticking to “wait and see,” that pricing is just noise.

There’s a deeper anxiety here — existential, even. The real issue isn’t just the tariffs or Fed hesitancy. It’s about credibility. The global market order feels like it’s cracking under the weight of overlapping policy resets — domestic and foreign — both being re-written in real-time. The Fed is stuck between softening growth and sticky inflation, while the White House is rewriting the economic playbook and the foreign policy script.

But maybe this isn’t just another chaotic trade tantrum. Strip away the theatrics, and Trump’s China policy looks less like madness and more like a calculated pressure campaign — one with tacit Western backing. No one wants to say it out loud, but the subtext is clear: the world’s tired of being China’s shock absorber. Whether it’s EV oversupply, solar panels, or cheap toys — no advanced economy wants to eat the overcapacity anymore.

This isn’t just “America First” — it’s a coalition of the fed-up. Europe’s sick of being flooded with subsidized green tech, ASEAN’s hedging its bets, and even Canada is drawing quiet red lines. Trump may be the battering ram, but the support act is growing. So maybe the tariffs, the rerouted supply chains, the bad cop act — maybe it’s part of a larger endgame: forcing China into a rules-based reset.

That’s the macro. The tail risk? A full fracture. A Cold War-style split where countries have to pick sides. If we land in that Axis-and-Allies scenario, 200% tariff walls become the new borders — and global trade as we know it gets shredded.

No wonder the calm feels uneasy.

Markets briefly bounced on Thursday after Trump teased a EU trade deal (details TBD) and promised a critical U.S.-Ukraine minerals pact next week. But it was all smoke. By the close, the Nasdaq 100 had shed 2.3% on the week, and the S&P was down 1.5%, shrugging off Trump’s cheerleading. Powell’s Wednesday “wait-and-see” killed the rally — and likely ruined Trump’s weekend.

The kicker? The dollar’s on a three-week losing streak. Confidence in U.S. assets is fraying. Treasuries saw yields climb Thursday, paring earlier gains, as oil prices and political risk added pressure. The term premium is rising — and not in a good way. Investors don’t know if it’s fiscal fears, unanchored inflation expectations, or just uncertainty over Powell’s future. Technicals have been messy too — driven by basis trade unwinds and swap flows — but beneath that, the message is clear: foreign money is walking.

Japanese investors, for one, have been quietly offloading U.S. bonds. It’s not necessarily a vote against American exceptionalism, but it’s a sign. When the yen strengthens and capital flows reverse ( hedging gets too expensive), it’s time to pay attention.

And while the ECB is softening — even preparing the runway for rate cuts — EURUSD hasn’t flinched. In normal times, a dovish ECB and a hawkish Fed would have traders shorting euros hand over fist. But these aren’t normal times. As I said in my ECB post-mortem, I’d usually be selling euro here. Instead? I’m long and bidding. Not because I love the euro — but because everything else looks worse.

In FX, you don’t need to be the prom queen. You just need to be less ugly than the rest. The euro passes — barely.

Bottom line: Powell fumbled the Bernanke 98/2 rule. He could’ve used communication as a tool — a little dovish signal would’ve bought time. Instead, the Fed clings to “data dependence” like it’s 2022. That’s not forward guidance — it’s backwash.

And now? Trump’s turned the volume up to 11. Between his Truth Social rants and off-the-cuff soundbites, he’s raised the stakes. Powell and the Fed are boxed in — they’re now stuck juggling a slowing economy and rising inflation. Welcome to the policy corner from hell.

Good luck threading that needle.