I’m taking off my hat as a human being and a concerned citizen and putting on my stock market cap.

This has been a bad week for Wall Street, as well as for the country. The stock market issue, I think, is not the trajectory of near-term earnings growth, but rather the PE multiple that investors will assign to the results of US companies whose stocks are traded on Wall Street.

Unusually in my experience, this is both about concept, rather than near-term results, and about politics:

–Canada says the Trump administration has broken the special relationship with it and it needs to turn to China as a trading partner, as a result

–after Trump’s appearance at Davos, the EU seems to be thinking the same thing

–the Renee Good autopsy shows she was killed by an ICE bullet fired into the left side of her head–meaning the shooter was off to the side of the car and not, as claimed, in its path, and showing that the government claim the shooter was defending himself against an attack with a lethal weapon (the car) is false

–James Comey reportedly made a powerful argument before Congress that he had proof beyond a reasonable doubt that Trump conspired to overthrow the presidential election results of 2020–and that Trump would have been convicted had the case been allowed to go to trial. Congress is refusing to release the transcript, suggesting Comey’s testimony is highly persuasive

–the administration also appears to be refusing to release the bulk of the Epstein files to Congress, despite a new law ordering it to do so, suggesting that the Trump-Epstein relationship was a lot deeper than the current public understanding

–Trump clearly wants to eliminate the independence of the Federal Reserve and to return to the Nixonian state of play, which ultimately created highly destrucdtive runaway inflation that took a decade or more of economic pain to reverse.

None of this, especially the last, is stuff to motivate PE multiple expansion. Maybe another way of putting this is that Trump’s actions are shifting the balance toward future negative surprises, both in the market PE and in earnings growth.

Arguably, I guess, the fact that the US has been pretty much the world’s worst stock market since the inauguration suggests some of this is already reflected in prices. It may well be that future market action will play out the same way, with losses reflected mostly in the loss of the dollar’s purchasing power. We’ll know more as Trump replaces the Fed chair.