I’ve asserted here many times that the stock market’s ups and downs drive the news rather than the other way around. This implies that if shares are in a strong rally, we tend to shade our interpretation of the headlines more bullishly. But what if stocks are going nuts in the face of indisputably bad news? That is currently the case, and the seeming paradox is so extreme that it all but settles the argument about whether the stock market’s tail wags the news media’s dog. What we are seeing is a ballistic surge in the broad averages even as the mainstream media bombard us with the grim certitudes of a mounting global trade war. Seldom has the disconnect between news and stocks seemed more perplexing.

And yet, we find so strong an advocate of free trade as the Wall Street Journal downplaying the significance of Trump’s tariff war against China, Europe and Canada in order to account for Wall Street’s seeming indifference to it. While the Journal‘s editorial page has yet to come around on this, the news editors have been propagating the crazy idea that America’s economy is so strong that it can weather even steep new levies on imported goods. Leave it to the Journal to cheerlead the nine-year-old bull market even if it means having to be be dismissive of something as pernicious as protectionism.

The ‘Chimps’ Will Need Help

The portfolio-managing chimps who make their living throwing Other People’s Money at a handful of stocks will need all the cheerleading they can get if they’re going to keep the bull market alive for yet a few more months in order to distribute millions of shares to the rubes. Stocks are already facing serious headwinds from stubbornly high oil prices, a strong dollar, a top in residential real estate, a shrinking supply of dollars, rising interest rates and an incipient inversion in the yield curve. How much more harm, one might ask, can a tariff war do?  I fear that we are destined to find out, perhaps as early as late summer or autumn.