LIVE MARKETS-Tariff kayfabe?

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TARIFF KAYFABE?

In pro-wrestling, kayfabe is the art of persuading audiences that everything performed in the ring is real.

Wall Street’s S&P 500 hit a record last week and the dollar has perked up, suggesting many investors now view the high drama of U.S. President Donald Trump’s tariff policy as mostly illusory, with threats of 70% levies mostly designed to give Republican voters a fast-charging and patriotic show.

Markets seem inured to the plotline. Many investors expect little price action on Wednesday if the White House’s 90-day trade deal deadline passes with a ring of the bell for another round of talks.

One highly-predicted scenario is that the EU and Japan will get 10% temporary baseline levies that do not settle permanently that much higher.

“Consensus among the investors and companies we’ve been in dialogue with is clearly that further escalation is not in the cards,” Morgan Stanley strategists said.

With no big trade war and U.S. economic data staying robust, Citi analysts have warned gold could also drop 20% from here.

Still, kayfabe works because when storylines become predictable a wrestler seeking supremacy in the ring will introduce plot twists designed to keep audiences guessing and opponents vulnerable.

Perhaps the so-called taco trade - FT columnist Robert Armstrong’s description of traders’ belief that Trump always chickens out if tariff threats upset the S&P - was the real illusion all along.

(Naomi Rovnick)

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