Good morning! Tariffs this, tariffs that — President Trump is keeping investors on their toes. Today’s edition unpacks the market volatility, a warning from the bond market, and Fed chatter. First time reading? Join 190,000 self-directed investors gaining an edge every morning. Sign up here. 

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That was fast

President Trump may have just started, ended and won the shortest trade war in history. 

After declaring 25% tariffs on Canada and Mexico Saturday evening, he announced he struck a deal with the leaders of both countries Monday afternoon, delaying the onset of tariffs by one month in exchange for a slate of concessions tied to border security. 

The stock market started the day deep in the red but then recouped much of its losses as the news rolled in and the trading day closed. Overnight futures traded solidly in the green.

“So far the market is confirming that deals done to help avoid tariffs are good for risk exposure and growth,” said Padhraic Garvey, ING’s regional head of research for the Americas. 

Bitcoin and other cryptocurrencies also reversed losses from earlier in the day.

Investors’ knee-jerk reaction in both directions can be chalked up to a couple things: 

1. The perceived inflation and business risks of tariffs 

2. Uncertainty on whether President Trump could get a deal done

The first bullet is fair game. There is a lot of unknown at play.

But to traders stuck on the second point — it might be time to revisit The Art of the Deal. 

At this point, it doesn’t take much reading between the lines to discern that Trump is signing tariff orders not with the goal of implementing them, but to strong-arm other nations to do a deal.

Indeed, the leaders of Canada and Mexico both agreed to the items at the top of Trump’s wish list.

Each nation will deploy 10,000 frontline workers to their respective US borders in an effort to curtail illegal immigration and drug trade. 

China, which Trump announced will get hit with a 10% tariff starting Tuesday, has yet to make news as of this writing. 

Investors should remember, too, that similar to the DeepSeek AI breakthrough, the earnings story and macro tailwinds underpinning the stock market looks as robust as ever. 

“Tariffs bring with them a lot of uncertainty, but let’s not forget that as quickly as these can be implemented, they can be removed as well,” said Ryan Detrick, chief markets strategist at Carson Group.

“But what do we know for sure? That earnings are at record levels, profit margins are a cycle highs and the consumer and labor markets remain incredibly resilient.” 

Notably, shares of US automakers — most of which have cross-border supply chains — dropped across the board Monday but then rebounded after hours following the update on tariffs.

• Tesla: -5.19% Monday, +1.52% after hours

• GM: -3.15% Monday, +2.71% after hours

• Ford: -1.88% Monday, +1.62% after hours

• Rivian: -1.35% Monday, +0.98% after hours

• Stellantis: -3.88% Monday, +1.43% after hours

Each of these five stocks remain negative over the last week, however, and more choppiness is likely to follow depending on what the White House announces next.  

It’s only natural for investors to want a calm and predictable outlook. Given what we know about the sitting president, the odds of that are low.

That said, in every year under every administration, investors deal with chop.

“Volatility is the toll we pay to invest and every single year has some bad days and scary headlines,” Detrick said. “So to think 2025 was going to be different wasn’t a good strategy.”

Comments or feedback? Reply directly to this email or let me know on X @philrosenn.

Elsewhere:

💰️Trump ordered a sovereign wealth fund. The president signed an executive order Monday directing the US to begin developing a government-owned investment arm, which could be used to profit off TikTok if a deal gets done for an American buyer. He said the US could eventually catch Saudi Arabia in total fund size. (AP)

⚡️ Palantir crushed earnings. The stock skyrocketed double-digits in after-hours trading after the company reported its earnings per share gained 75% compared to a year ago. Quarterly revenue hit $828 million, beating expectations for $776 million and up 36% on the year. (Barron’s)

✂️ It might be awhile before another Fed rate cut. That’s what Atlanta Fed President Raphael Bostic said Monday: “I want to see what the 100 basis points of reduction that we did at the end of last year translates to in terms of the economy.” (Bloomberg)

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Rapid-fire:

• The president of Ecuador announced a 27% tariff on Mexican goods (Reuters)

• Vanguard slashed fees for 168 mutual funds and ETF share classes across 87 funds (CNBC)

• The bond market is flashing a warning about an inflation rebound, with the gap between 2- and 30-year bonds narrowing by the most since December (Bloomberg)

• President Trump said the Fed’s decision to hold rates steady in January “was the right thing to do” (Yahoo Finance)

• Shares of Temu parent company PDD dropped more than 5% in Monday trading (CNBC)

• Boston Fed President Collins said the central bank is unlikely to react to the initial impact of tariffs on prices (Bloomberg)

• Tesla stock dropped 5% during Monday’s trading session before rebounding after hours (CNBC)

• Google parent Alphabet reports earnings after the bell Tuesday, and Amazon is set to report Thursday afternoon

Traders see 87% odds that Trump hits at least one country with an official tariff before March, according to Kalshi, the biggest US prediction market:

In case you missed it:

Anthony Pompliano and I just launched the Best Ideas Club. Every Sunday, we send members a premium report unpacking one high-conviction trade or investment idea, sourced from an interview with a world-class investor.

The latest report unpacks a veteran macro investors’ top investment pick for 2025 — a “dirt-cheap” AI play that’s set to rally 72% this year.

Last thing: