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Have you ever seen sentiment this bad outside of a recession? I have not. I worry about the soft data becoming market reality, becoming hard data reality. And I think that's the path we are on right now. And it's a path that has a strong whiff of stagflation, which raises the question, at what point can you feel like that worst case scenario isn't what's going to come to pass?
What could happen that could make you think, actually, this is a rewiring of the global order akin to Thatcher or Reagan. So think of what has happened. Lost two months. The last two months we've gone from US economic exceptionalism to stagflation. We've gone from Germany is stuck in a low level equilibrium to Germany's Sputnik moment.
We've gone from this is going to be a one round rewiring of the global economy to this is going to be a multi round rewiring. We've gone from the US outperforming to the US underperforming European equity by 17 percentage points. We've gone from a bond market that was worried about the vigilantes to a bond market that's torn between low growth and high inflation.
This has been an incredible transformation. Consensus is we in an uncertain period where I think is a really important point is where is this leading to? And as you said, there's two possibilities. One, I call it the Thatcher Reagan, where we go through disturbances, we rewire the economies and we come out with a streamlined government.
Better that dynamics and an able private sector with major innovations coming up that can change productivity and a fairer trading system. That's alternate option B is Jimmy Carter on steroids, meaning a stagflation that gets embedded in the system, that paralyzes policymakers and it takes a major slowdown in order for the policy stance to response, I think is 5050.
The market seizes as 8020. And that's that's what we've got to figure out. Wait, hold on a second. You think the market is pricing in an 80% chance of the Reagan Thatcher situation if the best case scenario and only a 20% chance at the same time that you do see this huge spread in performance between the US and Germany, you do see such incredible entrenched pessimism in both consumers and corporate executives.
Market prices, if you look what's happened to credit spreads have hardly moved. If you see equity, we're back to November levels. We haven't had dramatic. What we have priced in is the uncertainty of the journey. What we haven't priced in is what I think is a 5050 destination, that that is what's going to sort itself out over the next few weeks and months.
And I worry when I hear the Fed, when I hear travel policies last press conference dismissed the soft data as, oh, soft data is not going to get translated into anything worse. Swinging again, the word transitory on tariffs. You've spend the whole morning saying, Do I think we don't know how other countries are going to respond?
If you hear carefully what the president has been saying about tariffs and you ask the question, how does he meet the multiple objectives he set out, he has set out revenue. He has set out on shoring. He has set out nonpolitical. He has set out with a profit in a fair trading system. What you end up with is option three and really the hybrid approach where you have a universal tariff across the board, then you have surcharges according to sector, according to country that are subject to multiple rounds of negotiation, not one round, multiple rounds.
If that happens, then the notion that the inflationary effects are transitory would be really good news because we have a recent history of inflation and people will not dismiss it as quickly as the Fed seems confident that they will. If we want to see potentially this Reagan factor constructive approach, what do you want to hear from the president today?
So it needs to be a as far away from a spaghetti bowl as possible. Spaghetti bowls are really hard to unwind. That is why protectionism is so dangerous, is because it's so tempting to use a country specific, sector specific. And next thing you know, you cannot figure out where the distortions are in the economy.
So if it is the Reagan Thatcher moment, you need clarity on an across the board universal tariff. You need clarity on what's going to come on deregulation, because we haven't heard much on that as yet. Any clarity on what this public sector reform are we making it and we're breaking it. That's a fundamental question about the public sector sector reform that we're seeing right now.
You just need clarity and that's why I put it 5050. I was recently in a meeting with people I respect and I forced them into this corner. Solutions. I said, he is often a Reagan Thatcher. His option be Jimmy Carter. Give me probabilities. These are smart people. The range went from 8020 to 2080. That is the extent of uncertainty about the destination.
But you likely won't get clarity today if Trump wants to have negotiations and do deals. So what's your base case? So my base case is exactly what you said is, is that we're going to get option three hybrid hybrid. But I must say and I laughed when John said people said, I don't know. I put something on social media today saying every time I've been asked on this question, I've responded.
I don't know. It doesn't stop people from asking me. So if you really put a gun to my head, I say, if the objective of the administration is to meet all these things with tariffs, then this is what you would get. That's the logic of the case. It's not a prediction because I don't think anybody knows what's coming other than a very close circle around the president.
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