Hey guys, I’m sending out Monday’s Triad on Sunday night for reasons that will be clear when you read it. So you won’t get another Triad in your inbox on Monday—but keep your eyes on the Bulwark homepage, YouTube channel, and podcasts. The team is doing great work making sense of the chaos monkeys. –JVLTraders work on the floor of the New York Stock Exchange (NYSE) at the opening bell on January 30, 2025, in New York City. (Photo by Timothy A. Clary/AFP via Getty Images)When the New York Stock Exchange opens on Monday at 9:30 a.m. we will see just how seriously the world takes the assault Elon Musk and Donald Trump launched on the American system of government.What follows is a guide for interpreting the drop.First, some ground rules. The securities markets have a system of circuit breakers to halt massive declines. There are three circuit breakers that are measured by calculating a percentage decline in the S&P 500 from the close of the previous day: Level 1 (7 percent), Level 2 (13 percent), and Level 3 (20 percent). If Levels 1 or 2 are tripped before 3:25 p.m., all trading is halted for 15 minutes. If Level 3 is tripped at any point in the day, trading is halted for the remainder of the day.Last Friday the S&P closed at 6,041. Trading ended at 4:00 p.m., per the norm, but at 1:15 p.m. a selloff started when reports of Trump’s proposed tariffs against Canada and Mexico hit the wires. In less than three hours, the S&P lost 1.1 percent from its daily high.ShareHere are the S&P’s circuit breaker numbers for Monday:Level 1: 5,617Level 2: 5,255Level 3: 4,832For context, since 2008 we have only had seven S&P drops greater than 7.6 percent in a single day:The two worst of these were in March 2020 as the markets began to grasp the full ramifications of COVID. The other drops all took place at the opening of the 2008 financial crisis.So those are the kinds of events that trigger large-scale panic in the markets: global pandemics and global financial meltdowns.Will Monday’s pullback register on those magnitudes? Or will it be more modest and hold under 7 percent?Leave a commentThe answer to that question will tell us what the markets believe about Musk’s and Trump’s intentions. Here are four scenarios:(1)Drop is < 5 percent: The markets do not believe that Trump’s tariffs on Mexico and Canada are likely to remain in place. Nor are they especially concerned by the reports of turmoil in Washington over the weekend. They basically believe everything is normal and that Trump will quickly revert to par, allowing the broader economy to continue more or less as normal.(2) Drop is 5 percent to 7 percent: The markets are concerned that Trump’s tariffs will impact the American economy in the near term and that this movement could trigger broader recessionary risks. They believe that Trump might be responsive to market pressure, but they aren’t sold on this hope.The markets are focusing all of their attention on the
