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“Either the entire street is wrong, or the good times will continue to roll.”

So said a top hedge fund manager, remarking recently to On The Money about the weird disconnect he’s seeing lately in how the market is pricing in Trump’s trade war. 

What surprised him is the latest iteration of the market zig-zagging is that after freaking out, investors appear to be pricing in the Trump tariffs as a big bowl of nothing.

The recent maybe irrational exuberance comes even as Trump keeps throwing fuel on the tariff fire.

After pausing them on the world, including the most draconian levies on China, which supplies the US with cheap goods and keeps our inflation rate stable, he just blurted out that he’s doubling tariffs on steel and aluminum.

The market didn’t tank as it did during the early days of the tariff tantrum. In fact, there’s green on the screen for a policy that is supposed to slow growth and/or increase inflation, according to most economists.

So, what gives?

First, economists arent making the market bets you’re seeing. Asset managers, hedge funders, traders and a bunch of so-called mom-and-pop investors continue to show an appetite to buy, and digest bad news in the most favorable light.

The best I can tell is that they’re making a forward-looking bet that Trump, through his trusty and highly competent Treasury Secretary Scott Bessent, will negotiate all of the tariffs — even against super adversaries like China — down to something either meaningless or manageable for the economy to absorb. 

Stocks will then trend higher on his deregulation and tax policy found in the Big Beautiful Bill, the thinking goes.

Commerce Secretary Howard Lutnick’s MAGA-inspired dream that tariffs on foreign goods will create a domestic manufacturing utopia will never materialize, because Lutnick is largely out of the picture. Bessent has taken the reins, and hes crafting trade deals that will lead to stable economic growth, low inflation and high-tech manufacturing jobs the Trump tax and regulatory policy will create, or so the thinking goes.

So, what could go wrong? A lot, according to a few smart Wall Streeters I know as they look back at recent market history and figure out when was the last time the markets defied conventional wisdom and got things so wrong before an economic storm hit.

One big misread came in the run-up to the 2008 financial crisis. Every major CEO and most large investors (not all but most) viewed the 2007 “credit crunch,” where banks cut back lending as housing prices tanked, as simply a downturn in the economic cycle. A few Fed rate cuts, and presto, things would be back to normal.

Recall how the Dow hit then historic highs in October 2007 (around 14K), just before the bottom fell out early the following year. It began with bond insurers imploding, then subprime lenders, then Bear Stearns and Lehman Brothers.

By the end of September 2008, the meltdown hit nearly ever bank and Wall Street firm because the housing downturn was more than a downturn, it impaired the balance sheets of major financial institutions so much that most (except Jamie Dimons fortress balance sheet at JPMorgan) were on the verge of insolvency

After the financial collapse, and the government bailouts, came the Great Recession, which forever altered the political landscape. It ushered in a wave of left-wing (Barack Obama) and later right-wing populism (Donald Trump).

There are plenty of structural differences between 2008 and today. Our banks are pretty sound, but we have more debt, a lot more. We are more dependent on foreign buyers of the debt, without whom interest rates would be much higher as debt payments continue to grow.

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The trade war has pissed off some of our foreign bond buyers, namely Japan and China. 

Plus markets hate being surprised. If we’re experiencing a bit of irrational exuberance before the reality of higher baseline tariffs kick in no matter what deals are cut, if the economy does begin to falter and inflation does pickup, if foreign buyers dont keep buying our debt and interest rates spike, the correction could be pretty brutal if history is any guide, traders tell On The Money.

Until that happens, it’s all blue skies ahead.

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Reds’ Burns fans 1st 5 hitters in his MLB debut

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Reds' Burns fans 1st 5 hitters in his MLB debut

CINCINNATI — Rookie Chase Burns became the first starting pitcher in the expansion era to strike out the first five batters he faced in his major league debut.

He was not able to carry the momentum through the rest of the game.

The 22-year old Cincinnati Reds right-hander, the second overall pick in last July’s amateur draft, allowed three runs over five innings Tuesday night in a 5-4, 11-inning win over the New York Yankees.

Burns struck out his first five batters before Jazz Chisholm Jr‘s single. He gave up six hits and struck out eight, the seventh Cincinnati starter to have at least that many in his first career start.

“We watched for everything,” Reds manager Terry Francona said of Burns. “He didn’t get too excited. I think he enjoyed the competition. There’s a lot to like.”

According to the Elias Sports Bureau, Burns also joined the Yankees’ Al Leiter and Tampa Bay’s Wade Davis as the only pitchers since 1961 whose first six outs in their debuts were strikeouts. Both gave up a run during the first two innings.

Burns struck out seven of the his first 10 hitters and allowed only one hit until Ben Rice led off the fourth by connecting on a hanging slider that went 413 feet and two-thirds of the way into the right field sun deck at Great American Ball Park.

Aaron Judge followed with a base hit. Burns retired the next two hitters, Chisholm got aboard with a single and Anthony Volpe hit a two-run triple when center fielder TJ Friedl made an ill-advised dive and the ball got by him.

“I think he’s a good pitcher,” Francona said. “I don’t think him giving up a couple runs is going to make somebody fold. If that was the case, we wouldn’t have brought him up.”

Burns averaged 98.1 mph with 48 fastballs, topping out with a pair at 100.1 mph in the first inning. He threw 24 sliders, eight changeups and one curveball. New York was 1-for-9 with six strikeouts in his first time through the order and 5-for-9 with a triple and home run the second time through.

Burns threw 53 of 81 pitches for strikes. His first big league pitch was a 98.4 mph fastball to Trent Grisham that just caught the inside corner of the plate. He got Judge to chase a 91.1 mile slider for the third out in the first inning.

“I guess you have to say Judge. I have watched him. He’s a big dude and one of the best hitters in the game,” Burns said when asked if any one strikeout stood out more than the others. “It was probably my favorite one.”

Burns fell behind 3-0 on three of the first 10 batters before ending up with strikeouts, and started 11 of 21 batters with strikes and induced 12 swing and misses. He is the fifth first-round selection from last year’s draft to reach the majors, joining Athletics first baseman Nick Kurtz, Royals outfielder Jac Caglianone, Angels second baseman Christian Moore and Astros outfielder Cam Smith, who was selected by the Cubs before going to Houston in the Kyle Tucker trade last December.

The Associated Press contributed to this report.

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Latz’s no-hit bid could land him in Texas rotation

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Latz's no-hit bid could land him in Texas rotation

BALTIMORE — Jacob Latz might have earned a spot in the Texas Rangers‘ rotation.

Manager Bruce Bochy says he’ll consider it.

“Of course,” Bochy said. “He’s a weapon whether he starts or he’s in the bullpen, but he’s stretched out. You’ve heard me say he’s got starter’s stuff.”

Latz took a no-hitter into the seventh inning Tuesday night against Baltimore, and although the Rangers blew a four-run lead, they recovered to win 6-5 in 10 innings. Latz set career highs in innings pitched (six-plus) and pitches (88) and lowered his ERA on the season to 3.22.

“I don’t know the plans going forward. I was kind of just trying to soak it all up today,” Latz said. “It was just a lot of fun out there.”

In his third career start and second of the season, Latz didn’t allow a hit until Ramon Laureano singled to center to start the bottom of the seventh. A walk later, Latz was removed, but a 4-0 Texas lead didn’t last much longer.

Chris Martin came on and gave up homers to each of his three batters — Gary Sanchez, Ramon Urias and Ryan O’Hearn — and left with the Rangers down 5-4. But a sacrifice fly by Jonah Heim the following inning tied it, and Evan Carter slid home safely on Sam Haggerty‘s grounder in the 10th.

Latz walked three and struck out four — including the last three hitters of the fifth inning. His previous longest outing in the majors was Thursday, when he threw 5 2/3 innings of relief in a loss to Kansas City.

“That’s one of the better jobs in all of baseball — to be a starting pitcher,” Latz said. “I’m not going to say I don’t want to be a starting pitcher. Obviously I do. I’m comfortable either way obviously. If it’s in the rotation, it’s great.”

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Pirates remove Cruz after he loses track of outs

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Pirates remove Cruz after he loses track of outs

MILWAUKEE — Pittsburgh Pirates outfielder Oneil Cruz said he lost track of the outs when he didn’t run out a double-play grounder, a move that led to his removal in his club’s 9-3 loss to the Milwaukee Brewers on Tuesday night.

The Pirates trailed 7-3 and had a runner on first with one out in the seventh when Cruz grounded into a 6-4-3 double play. Cruz slowed down after the Brewers got the force play at second, and he said afterward he believed that was the third out of the inning.

Pirates manager Don Kelly removed Cruz in favor of a defensive replacement in the eighth inning and said it was due to Cruz’s “energy and effort going down the line.” Cruz said after the game he understood Kelly’s decision.

“DK had all the rights to do what he did, and I’ll back him up on that,” Cruz said through an interpreter. “It was my fault because I thought there were two outs in that situation. That’s why I let off running to first base.”

Kelly said he explained to Cruz the reason for the benching.

“We talked,” Kelly said. “He knows the expectation. Right there, I feel we fell a little short.”

When he was asked whether Cruz would be back in the starting lineup Wednesday, Kelly was noncommittal.

“We’re going to sit down and talk, and we’ll figure that out,” Kelly said.

Cruz, 26, has batted just .156 (12-of-77) with 31 strikeouts this month after having a productive start to the season that included owning a .911 OPS in early May and hitting a 122.9 mph homer against the Brewers on May 25. That homer was the hardest-hit ball since Statcast started tracking that data in 2015.

Cruz is now hitting .208 with a .321 on-base percentage, a .404 slugging percentage, 13 homers, 31 RBIs and 26 steals in 71 games.

“He’s struggling at the plate right now,” Kelly said. “It’s difficult when you’re going through that and trying to figure it out. He’s working hard to do that. That’s one thing we’ve got to be mindful of, is not letting that offense carry over to defense and base running, and the energy and effort that we’re giving on any other aspects of the game as well.”

Cruz said his hitting slump “had nothing to do with what happened today” and isn’t impacting his focus on the basepaths or in the field. But he also said he appreciated Kelly’s instructions to him and noted how he can learn from veteran teammates Andrew McCutchen and Tommy Pham.

“They’re a really good example,” Cruz said. “They always run hard. They always go out there to do their 100%. That’s a teaching point for me. I accepted the way DK came to me and explained it and presented it to me.”

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