The Prof G Pod with Scott Galloway
Prof G Markets: What to Do in the Wake of Trump’s Tariff Pause
Mon, 14 Apr 2025
Scott and Ed dive into the ongoing trade war, unpacking how markets reacted to Trump’s 90-day tariff pause and the broader turmoil with China. They break down what may have just been the greatest day of insider trading in history, assess the damage to American 401Ks, and explore what likely drove Trump to hit pause on the tariffs. Scott also offers practical advice for weathering the uncertainty ahead. Vote for Prof G Markets at the Webby Awards Subscribe to the Prof G Markets newsletter Order "The Algebra of Wealth," out now Subscribe to No Mercy / No Malice Follow the podcast across socials @profgpod: Instagram Threads X Reddit Follow Scott on Instagram Follow Ed on Instagram and X Learn more about your ad choices. Visit podcastchoices.com/adchoices
Chapter 1: What sparked the discussion about Trump's tariff pause?
And for those of you who think I have Trump derangement syndrome, I have this thing called capitalism and democracy addiction syndrome. I really love Netflix and I love... you know, living somewhere nice. And I love rule of law. And I love people who make smart decisions and prosperity. I'm just so into this whole prosperity and rights thing. And I've gotten so used to it.
So Megyn Kelly is super easy to find. If you're looking for people to justify, like say he's playing 4D chess, right? No, he's not even playing fucking Jenga or checkers. He's playing Russian roulette. with everyone's prosperity. I am in a bad mood today, Ed.
I can tell. It is interesting how all these, I mean, the response to any criticism has always been Trump derangement syndrome. And I've said, you know, I think probably a month ago that there's a new syndrome, which is TDSDS, which is Trump derangement syndrome, derangement syndrome, where you basically ascribe any criticism of the government as a symptom of Trump derangement syndrome.
It is funny, this week I have not been hearing any accusations of TDS. I think people have finally gotten it through their heads that that's not really a valid argument you can make anymore. So we'll be getting into all of it today and all of the arguments that the other side has been making as to why any of this could possibly make sense. A few notes from me.
One, please go vote for us in the Webby Awards. Yes. Please vote for us. I need a raise. So we need to get this win under our belt. You think that's going to get you a raise?
Yes. Okay. Fine.
So go vote for us in the Webby Awards. Voting ends this week, so please go vote for us at vote.webbyawards.com. Type in Prof G Markets in the search bar. You will find us. Please vote for us. We'll also leave a link in the description to make it easy for you. And the second point I will make, just a bit of housekeeping before we start the show,
Starting in June, we're going to be going every single day on this podcast. And I think the events of this past week have made it very evident to us why we need to do that. We want to stay on top of the ball. We want to be up to date. We want to make sure that everyone is informed as we embark on this unbelievably wild ride over the next several years. So we're going to be doing markets daily.
But that's only going to be happening on the Prof G Markets feed. It's not going to be happening on the Prof G Pod feed. And so if you're listening on the Prof G Pod feed, the main feed, the logo is a turquoise symbol with Scott's head on it. I encourage you to go switch over now. subscribe to Prof G Markets.
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Chapter 2: What were the market reactions to the tariff pause?
that the S&P would rise by a huge amount within one day. They expire at the end of the day. And those options, we don't know who this was, but those options exploded by more than 2,000%. So this person, whoever it is, made millions. And of course, the only rational implication is that this individual knew what was going to happen, and they were insider trading. Again, we don't know who that was.
The Democrats are now calling for an investigation into this. And the big question is, did Trump tip someone off? I don't see any way that it couldn't have been that, or maybe it was sloppiness and word got out among his close group of friends that this is what he was going to do. But there is evidence that in the markets that someone was doing this, someone was insider trading.
So I think you're almost calling the prediction too late in that we know it actually happened. But all of your points there align with the first thing that I've been thinking coming out of this insane week. We had these unbelievable swings in the stock market, in the NASDAQ, in the S&P, in the Dow, the entire US stock market.
And essentially what's happened is the president has turned our economy or our stock market into a meme stock. you know, falling or rising 10 or more percentage points within a day for six days straight, those are the characteristics of a meme stock. That's something like a GameStop or an AMC or a cryptocurrency like a Fartcoin or a Cumrocket.
And that might sound funny or hyperbolic, but it was plainly true last week. The price movements of the S&P resembled those of a meme stock. which makes me ask the question, okay, well, what does it mean for us that our stock market has itself become a meme stock? I think there are a few implications. One, we're gonna see a huge surge in options trading, as evidenced by you.
People are gonna be making and losing huge amounts of money based not on the cash flows and the earnings of our economy, but on the words and the tweets of the spearheader of the movement, which is the president.
I think we're also going to see a massive influx of young investors who have grown up in an era of crypto and meme coins and who are just more excited by this short-term upside of volatility versus the long-term upside of actual investment, value investment. And three, and I think this is the most important consequence, I think our creditworthiness is going to collapse. Because lending...
far more so than investing, is fundamentally dependent on certainty and stability and reliability. And that's why, you know, you look at every meme stock in existence, they all have a junk rating. Look at GameStop, AMC, MicroStrategy. Yes, those stocks can at times outperform, but over the long term, the underlying default risk is way too high, which makes their debt essentially uninvestable.
And now we are putting the entire economy in that position. And this is the dark side that I don't think people are paying enough attention to right now. Because on Wednesday, stocks went up and people said, great, we're back to normal. We're not perfect pre-tariffs, but we're back on track. And what they seem to gloss over, though,
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Chapter 3: How did insider trading play a role in the market fluctuations?
They're cutting their spending. Companies are rerouting the supply chain. Every economic indicator is that there's less money and less activity. At the same time, interest rates are going up. That is stagflation. That takes you potentially into a depression.
If the cost of capital goes up as productivity and spending is going down, that is literally nitro and glycerin that explodes into stagflation and then a depression. I think he got both those data points. And someone said, this is really, really bad. And probably just as importantly, Alyssa was wearing a yellow ribbon to signify the hostages. Do you think she was doing that to impress me?
I need a distraction here, Ed. I need a distraction. Seriously, I think she's into me. I think she's into me.
What do you think? I have no comment on that. We were really getting somewhere. We were breaking new ground. I had to bring it back to Alyssa.
Oh, sorry. Stagflation. I'm sorry.
I think what you're saying there is the important point, which is that the bond market was the adult in the room. And you've said that for a while. And Andrew Ross Sorkin said it as well on this podcast.
If there is any blockade to this administration's efforts and the Republicans to get what they want over the next, call it two years, because we'll see what happens in two years in the midterms. The only... potential governor on them is, oddly enough, the bond market. If, in fact, the investor class around the world says, you know what, we're just not doing it this way.
We don't like what's going on here. They can vote with their wallet and they can say, we are not going to be buying your bonds unless you're going to pay us a lot more for them, in which case everything becomes a lot more expensive for all of us. And that is the only thing, frankly, that I can even imagine that is a governor on the politics of our country over the next, call it two years.
That's not what the administration is saying, though. And I think we should clear this up here. The way they are justifying this pause on the tariffs, the pullback, They say it was all this, it was this 4D chess move to put China in a corner, to bring our trading partners to the table.
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Chapter 4: What are the implications of the stock market resembling a meme stock?
I would say that the negotiations are the result of the massive inflow of inbound calls to come and negotiate. It had nothing to do with the market.
But the best interview to me, the most telling interview, was Trump's, where he's standing outside of the White House, and unprompted, he starts rambling about the bond market.
The bond market is very tricky. I was watching it. But if you look at it now, it's beautiful. The bond market right now is beautiful. But yeah, I saw last night where people were getting a little queasy. People were jumping a little bit out of line. They were getting yippy, you know? They were getting a little bit yippy, a little bit afraid.
And by the way, apparently he was watching Jamie Dimon's interview on Fox just a couple hours before he hit send on the tariff pause. And that's the interview where Jamie was saying he was expecting a recession. So this idea that this was all part of the plan and that this was not a reaction to the bond markets, that it was just a coincidence that it happened right after yields went haywire,
Total lie. It is absolutely a response to the bond markets. This was the administration realizing the markets are more powerful than they are. The world will only tolerate so much of their craziness. And they were essentially strong-armed by the bond vigilantes, the bond investors, into admitting defeat. Now, of course, they can't say that. We remember who Trump's mentor was, Roy Cohn.
His number one rule, never admit defeat. So they come out and say, this was a big win for us. But I think the most pathetic thing that I saw was watching all of his backers file into a line and having been genuinely and publicly rattled by what had happened, genuinely frightened by the world's response, they go out and say what a genius Trump is.
And I'd like to read you some quotes here from Stephen Miller. This is from Twitter. He said, quote, "'You have been watching the greatest economic master strategy from an American president in history.'" From David Sachs, quote, once again, Trump was right about everything. From Bill Ackman, quote, this was brilliantly executed by Donald Trump. Textbook, the art of the deal.
And my response to Bill Ackman would be, what deal? I mean, seriously, tell me, what is the deal? What did we get here?
Their incompetence is just bursting at the seams here. They can't even coordinate their messaging. And although I don't think Bill's coordinating, well, I don't know this, but that Stephen Miller tweet and that David Sachs tweet, that was written by a White House communications director that works for Dear Leader. I mean, look at how just similarly sycophantic it is.
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Chapter 5: How does the bond market affect the economy?
You don't hear about the guy in Pittsburgh or Gary, Indiana, who only has so much in his 401k and his retirement account, who actually sold at the bottom. And hundreds of thousands of Americans did this, and they're looking at their 401ks this week, and they have to digest this now. They have just registered not an unrealized loss, but a realized loss of 10% or more because they sold.
So I just want to point that out, too, that, you know... For many of us, it was just a wild week, right? It went up, it went down, it went up, it went down. It looks like it's coming down again, and it looks like the long-term trend is down. But for many people, this was a flat-out loss. Just pure, unadulterated, down 10%.
And no amount of the 4D chess justification or the sycophantry is going to change that. And I just want to point that out, you know? A lot of people got really, really hurt last week. Now, on investing trends in general, what we're identifying here is a massive fuck-up from the administration who went ahead with this crazy tariff idea.
The bond market told them that was a bad idea, and then they pulled it at the last minute. We've been talking for a while about this idea
global reorganization of the investment economy, where America has benefited from, generally speaking, massive inflows, perhaps unjustified, but at the very least justified by the fact that we had a stable government that was respected by investors around the world. Our thesis has been that we might be witnessing a rotation away from that dynamic, which would be
It would massively upend global markets. Given what happened with pulling the tariffs, what do you think that does to this dynamic? What is happening now?
No one gets out of this alive. I mean, there'll be a few people who... bought puts or something and show their picture on Reddit or whatever, there'll be a few, you know, a few quote unquote speculators that win. But 99%, I mean, there's so many cohorts they're going to lose here. Let's talk about people hoping to retire. And they thought, wow, the markets have done great.
They thought, okay, I can retire. Well, that's maybe not as true now. Families, If these tariffs are anything resembling what they're stating, the example I use is toys under the Christmas tree. They're just immediately going to fill it. Young people, what do you think has happened to hiring in the last week? I got to imagine so many people recruiting at colleges, high schools.
You finally get an interview that said, hey, we love you. We want to bring you in, but we're putting everything on pause right now. Microsoft just announced it scrapped a $1 billion data center project in Ohio. Stellantis paused production in Canada and Mexico, leading to 900 layoffs at U.S. plants in Michigan and Indiana.
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Chapter 6: What is the future outlook for American manufacturing jobs?
We'll be right back. If you're enjoying the show so far, hit follow and leave us a review on the Prof G Markets feed.
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We're back with Profiteer Markets. I think you look at what has happened over the past 10, 20 years. The reason that we've had all this capital entering the US markets is because it was sort of the only place where you could get these really strong returns and you had a guarantee of relatively low risk compared to other nations.
And when you say that the US has sort of given up its edge, I think what's really happened is the US has given up its edge in terms of a...
relatively risk-free investment there is now all of this associated risk attached to america that didn't exist before and this is the kind of thing that affects the chinese markets i mean those chinese companies that we talk about they do very well but the multiple is contracted because of this government risk that everyone prices in and now we're seeing a reversal of that trend
And if you go into Europe, I think a lot of investors are thinking, I can get relatively similar returns at lower risk, but also it's very cheap right now. You just look at the multiples compared to the US, the entire European stock market on a price to earnings basis is cheaper.
So I think what we're saying, I mean, we have been saying do nothing, which I think is the right call on a weekly basis. just given the volatility we saw last week. But when else would we rotate out than now? I mean, isn't it the time?
I think that's a fair point. What I would suggest is the following, is that it is very hard to read the label from inside of the bottle. You want to talk to a tax advisor. Also, this sounds superfluous, you want to talk to your partner. You want to get alignment with your partner. Hey, this is what's going on in the market.
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Chapter 7: Why do Americans have a lower tolerance for economic pain?
They look at the information the officer had at that moment and did he or she make the best decision possible based on the information at the time. And this is what you want to do. You want to speak to people. You want to go to a robo-advisor. There's so much good information online.
You want to talk to friends, be open about money, and get alignment with your partners such that you could look back. And even if things don't pan out as well as I think they will if you diversify or you do, you made the right decision at the time. That's how – because what people don't realize is there's returns, there's financial returns, and there's mental health returns.
I really did have this suspicion that the markets were going to puke, and I thought a couple times about going deep and really shorting the market aggressively. And I didn't do it, and I would have made a lot of money. But here's the thing. I'm really diversified right now. And that's been the right decision.
So I haven't gone aggressively at anyone's strategy because I've decided at this age, I'm not looking to get rich. I'm looking to not get poor. And if I talk to enough smart people, which I do, they would say, Scott— You need to just be wildly fucking diversified. Even if you leave some upside on the table, you need to be wildly diversified. You can take some big swings right now, Ed.
I'm not suggesting you do that, but you can take bigger swings than me. And by virtue of the fact you're young, you're probably going to have to be overly concentrated in a house at some point or overly concentrated in terms of your wealth and your job, whatever it might be. But you have another 40 years to make money.
If you're a little bit older and you have some assets, I absolutely think that the D word, should be on your mind all day long, and that is diversification.
Yes. And I also want to emphasize something you point out there, which is that this has been a months-long venture for you. It wasn't that you woke up one day and you decided, okay, I'm rotating out. This has been something you've been doing over the course of several months, which makes sense because the entire bet that we're describing here is a bet based on capital flows.
We're not betting that some... massive crisis event is going to trigger a reversal that's going to happen within a day, we're describing a bet that involves large institutions and large investors gently and gradually re-steering their investment into a different locale. And that is something that we're going to see play out over, let's face it, years.
So if you're going to make this play, I think what you want to do is what Scott is describing here, which is drag it out. You don't have to do it all in one go. You can make it a months-long play. You could even make it a years-long play, because the bet is that those returns are going to come not within a day, but within several years. Let's take a look at the week ahead.
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