The Wait for Xi: A Friday Morning Fever Dream
Or: How I Learned to Stop Worrying and Love the Trade War Meetings That Might Not Happen
It's Friday morning and the market has collectively decided to front-run a conversation that may never occur between two world leaders who haven't actually confirmed the date, time, or whether they're even talking about the same things anymore.
SK Hynix is up 6.9%. The MSCI Asia ex-Japan Index is kissing all-time highs. Tech stocks are leading the charge across the region because, apparently, the mere rumor of a Trump-Xi meeting next week has induced enough dopamine to make investors forget that we literally spent the last 48 hours watching earnings implode, the unemployment picture turn sour, and the labor market's true pathology finally leak into public consciousness.
Let's rewind, because the cognitive dissonance is remarkable.
What Actually Happened
Tesla missed earnings by six cents on the third quarter. Not a miss. A six cent miss. And yet the stock absorbed it like a punch from a child. Meanwhile, profit collapsed 37 percent year-over-year. Thirty. Seven. Percent. Revenue is up 12 percent and earnings are getting cut in half. This is the ratio that nobody wants to talk about because it reveals the lie everyone's been living: growth-at-any-cost eventually requires pricing power you don't have, and when you run out of it, the whole narrative implodes.
IBM missed. Tesla missed. The Nasdaq and S&P are perched near all-time highs anyway because apparently the market has decided that earnings season is merely decorative. It's the preliminary CPI number (coming today, released during a government shutdown because of course it is) that might actually matter. Core inflation running at 2.9 percent year-over-year. Headline inflation inching toward 3.1 percent. The Fed cut rates 25 basis points two weeks ago and now they're wondering if they went too soft.
But never mind all that.
The Headline
Crude oil jumped 5 percent—no, wait, more like 5.7 percent for Brent—on news of fresh U.S. sanctions against Russia's biggest oil companies. This is geopolitics doing what geopolitics does best: creating short-term tailwinds for whoever's sitting in the right sector at the right moment. Energy stocks rally. Inflation expectations rise modestly. The yield curve gets another excuse to steepen. Everyone acts surprised and grateful, as if higher oil prices are always good news for equities and not literally a drag on consumer spending and manufacturing input costs.
But the real headline? The market is pricing in the belief that Trump and Xi will have lunch in South Korea next week and everything will be fine.
The Absence of News Is the News
Here's what I mean by fever dream: We're in a government shutdown. The BLS literally called back employees specifically to release yesterday's CPI report. We don't have nonfarm payrolls. We don't have construction spending. We don't have half the data that moves markets. The private sector ADP report showed job losses last month. Losses. The trend is deteriorating and we're flying blind.
And what's the reaction? "The rumors of a Trump-Xi meeting are bullish, so tech stocks in Asia are ripping."
This is what's called "looking beyond the fundamentals." In reality, it's called "running out of things to buy except hope."
The Tariff Theater Nobody Wants to See
Trump is still threatening 200 to 300 percent tariffs on semiconductors. He's actually threatening to impose 25 percent tariffs on imported heavy trucks starting October 1st—which means Paccar jumped 7 percent on the news that its domestic competitors will have an artificial cost advantage handed to them by government decree. He's talking about 30 percent on upholstered furniture now. The Section 232 investigation into semiconductors has been going since April and still hasn't officially closed.
This is the environment: the largest companies get exemptions (Intel, TSMC, Samsung) because they've promised to invest in the U.S. Everyone else gets taxed into oblivion or forced into hasty capital allocation decisions they haven't thought through. The market loves this because it consolidates power into the hands of mega-cap players. It absolutely hates it when you sit down and think about what it actually means for supply chains, pricing, and the pace of AI capex.
But you won't think about that if you're buying SK Hynix at all-time highs on the rumor of a meeting.
The Bond Market's Whisper
The 10-year Treasury yield hit six-month lows near 3.95 percent. The market is beginning to price a recession. Not consciously, not directly, but the movement is there. Longer duration assets rally when growth gets questioned. The VIX spiked to 29 this week before reversing. That's not "healthy volatility." That's the price of uncertainty before someone decides to suppress it with a headline.
Futures are pricing two more 25-basis-point rate cuts for the rest of 2025. The Fed's dot plot says two more cuts total. One side sees three total cuts in the cycle. The other side sees a pause. The confusion in the market is basically the Fed admitting it has no idea whether we're in a soft landing or a recession pretending to be a soft landing.
But never mind all that. Xi is meeting with Trump. Probably. Maybe. The rumor is enough.
The Gold Selloff Nobody Believed
Gold had a two percent pullback yesterday after hitting new records. All that retail FOMO into ETFs finally got burned. People took profits. For about six hours, the precious metal trade normalized and then reversed again on Friday because the mere concept of trade war de-escalation apparently means investors want to reduce their hedges against currency devaluation and geopolitical chaos. That made perfect sense. For someone.
What We're Actually Watching
Earnings are strong-ish in pockets. Hospitality, industrials, select tech. But margin compression is real and it's everywhere except in mega-cap names that have pricing power. The labor market is rolling over whether anybody wants to admit it or not. Inflation is sticky and tariffs will make it stickier. The bond market is screaming about growth concerns. The stock market is screaming about AI and rate cuts.
One of them will be right. Probably not both.
For now, we're in the fever dream phase. The market is waiting for Xi. The rumor of a meeting is enough to push Asia into all-time highs. Tech stocks are leading. The VIX reversed on hope. Gold pulled back on hope. Oil is up on geopolitics, which is at least based in something resembling reality.
When the meeting either happens or doesn't happen, when the trade war either de-escalates or escalates, when earnings season actually requires everyone to admit that growth is narrower than we thought—that's when the real volatility starts.
Until then, we're just waiting for Xi to show up.
And if he doesn't? Well, the market's already priced that in too. Probably.