Stock Market Tarrified as President Dump Risks Turning Recession into a Stagflationary Depression
Stock-Markets / Stock Market 2025 Aug 31, 2025 - 04:07 PM GMTBy: Nadeem_Walayat
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Stock Market Tarrified as President Dump Risks Turning Recession into a Stagflationary Depression
President Dump remains determined to destroy the American economy. Yes I get it many don't like it when I say it like it is, well who else do you think just delivered a 20% drop in the S&P? Biden? was it Biden? What are folk going to say when 20% turns into 30%? Don't get me wrong Trump was always DESTINED to wreck the American economy and send stocks into a deep bear market, it's just that he's not letting anyone come up for air, so we are all drowning, trying to abandon ship as what he is doing WILL deliver Inflation, WILL deliver job losses, will deliver a recession where the risk is Inflation + recession + job losses = STAGFLATION! Which translates into a 30% market drop being a BEST CASE SCENERIO!
Tariffs, Tariffs, Tariffs, then when faced with the emerging reality of a bond market collapse the opposite of what President Stupid thought would happen what does the Tariff King do? REVERSE COURSE! Exempt 90% from tariffs that the US imports from China, leaving the 150% tariff on the remaining 10% so that President Dumbo can claim victory. Wait it gets worse the exemptions are on goods for the big tech corps who are PAYING TRUMP MONEY! So high tech is exempted, you know the stuff that Trump supposedly wants to be made in America whilst tariffs remain on the low tech or no tech such as food stuffs. Tim Cook bought the exemption for Apple for a million bucks! The Trump presidency is all about making the Trump Cabal RICH! In pursuit of which Trump is burning the US economy as folk will soon find out when the job losses start rolling in.
To Infinity and beyond latest tariffs upto 245% on Ghina.
And now President Stupid has targeted our beloved Nvidia which just saw 10% of it's revenues wiped out on banning export of the H100's to China (2 year old AI tech), so it should not come as a surprise that Nvidia and the rest of the semis took a hit of typically 5%. Still it gives another opp to accumulate numero uno. where new all time highs await a higher high above $115. Alls folk need to know is that AI is not going away, AI is continuing to ACCELERATE! So the cheaper Nvidia gets in the present the better because earnings growth means eventually Nvidia will trade to a new all time high on route to over $200, until then we await bullish triggers such as a break above $115.
How can any one invest in a time of maximum uncertainty as US Tariffs policy flip flops more than a fish out of water. First there was the 10% reversal on ALL except China accompanied by messages that the world is lining up to kiss Trumps fat ass and now exemptions for this that and the other, what was the trigger? That which I have been warning of for a month! The brewing US bond market apocalypse consequences due to capital flight out of the US as we saw stocks, dollar and bonds sharply lower at the SAME TIME! That's not supposed to happen and definitely not what the US is positioned for given the $1.5 trillion budget deficit AND $9 trillion of debt needing refinancing this year! Hence we are still racing towards a US Bond Market PANIC as a consequence of all of the chaos that President Dumbo has unleashed on the global financial and economic system.
Stocks along with the dollar falling caught many by surprise because what should happen at such times is a flight to the safety of US bonds as folk kept reminding me in the comments, look Nadeem bonds are higher there is no flight of capital, like Trading Places's, wait for it wait for it, BANG! 10 Year yield spikes to 4.6%. As I have been iterating for over a month capital is flowing out of the US and into European and Japanese bonds that in 4 words is best summarised by the "Yen Carry Trade Unwind" that I warned could trigger a bond market panic event that would make the past few weeks look like a picnic given President Dumbo randomly announcing escalations in his trade war, last I heard it was 145% on China, 200%+ coming soon!.
The whole trade war escalation with China is just plain dumb as it hurts both countries but the US more than China given that it will send prices through the roof in the US whilst resulting in excess supply in China, For instance the Chinese economy is $20 trillion of which exports to the US are $500 billion of mostly electronic goods and components such as chips, laptops and iphones that the US relies on for it's supply chains that the tariffs disrupt. The advantage is to China because Trump chose to go to war against the whole world so the likes of Canada are looking to diversify away from being beholden to the US by doing trade deals with the likes of China never mind that China is the Saudi Arabia of rare earths and the panic that could trigger. Apparently Trump awaits a phone call from Xi to offer him a deal but that phone remains silent as instead China responds by halting orders of Boeing planes.
Many folks perception of global trade is completely wrong! The US NEEDS $500 billion of stuff from China to function else they would not BUY IT! Whilst China needs about $140 billion of stuff that the US produces. So who gets damaged the most during the trade war?
Bring back jobs President Dumbo says, are you going to work for dollar a day Vietnam style? Have Apple setup foxcom style slave factories where workers jump off the roof to escape?
Its simple, the US needs $500 billion worth of goods from China, cut that out then the US is short of $500 billion of stuff that if needs that it does not produce itself at an economic price. Yes sure China is a rival Empire to the US so this is part of a grand plan to box China in, in which case why the hell go to war against ALLIES such as Europe and Canada? I mean the only reason Europe has any beef with China is because the US keeps ramming it down Europe's throat!
THE US NEEDS TRADE WITH CHINA MORE THAN CHINA NEEDS TRADE WITH THE US! If china really retaliates and for instance suspends shipment of rare earths it will be Trump kissing Xi's ass and not the other way round! The way I see it China holds most of the cards, China has the factories, China has the skilled labour paid at a fraction of what US workers would want. Where are the factories? where are the skilled workers? It takes decades to build up such infrastructure and even then there will be the question of cost. In this trade war the advantage is to China.
Now having back tracked to some degree the initial reaction to should be bullish for stocks, unless President Dumbo reverses course once more! The US is fast racing towards a Bond market collapse which as I commented weeks ago required a reversal in the tariffs policy to prevent from manifesting so as to stem the tide of capital flight out of the US which given the chaos of Agent of Orange the market now demands a Moron premium to hold US assets such as stocks, dollar and bonds.
So whilst Trump ignored the plunging stock market given that it should have resulted in a flight of capital into the safety of US bonds, the only problem with theory is that the opposite HAPPANED! the US is haemorrhaging capital resulting in bond yields going higher which means HIGHER INTEREST COSTS on that $9 trillion of debt due to be refinanced this year and so Trump is being forced to announce tariffs reversals, in attempts to bring the yields lower.
What's basically happened is that the markets are now pricing in a Moron premium to hold US assets such as the dollar and bonds, US bonds are not the safe haven they once were not with the tariffs inflation freight train hurtling towards the US regardless of the dip in CPLIE for March data and maybe also for April, it doesn't matter the damage has been done, economic contraction WITH INFLATION is in the pipeline which the markets attempt to discount in the present..
The moron premium means higher yields for US bonds, all that wealth destruction in the US stock market, some $7 trillion was for NOTHING!
Trump like the North Korean dictator is incapable of acknowledging mistakes, alls he wants to hear is folk singing his praises at to his masterful management of chaos. He even spoke about the greatest stock market rally in history completely ignoring the 20% dump in US stocks that preceded it!
Alls trade barriers do is make the US LESS COMPETITIVE, WEAKEN THE US, smaller, weaker, slower. Instead the US should be seeking to race ahead of China, become bigger faster, stronger, that's how the US remains Top Dog.
The moron premium when tariffs jump from 54% to 105% and then 125% in advance of which President Dumbo turned friends into foes so they would be more susceptible to trade dialogue with China against a common foe.
This is the calm before the Inflation and Recession Storm. Dollar, Stocks and Bonds all down means the markets are pricing in STAGFLATION. This time is different because Trump constantly seeks to ESCALATE and only backs down when the SHTF!
As for our beloved AI tech stocks, supply chain disruption does not bode well for the likes of Apple and Tesla, whilst AI data centre deployment will see costs rise and slowdown in infrastructure build. The moron clearly does not understand that it takes years to relocate supply chains never mind access to rare earths that China is the Saudi Arabia of, Add rising costs and uncertainty of supply, policy and demand shocks then I don't see how corporate earnings are going to be able to keep growing.
But there is even worse to come than an inflationary recession because the Trade War could result in an actual War with China as that is where reciprocity leads, In fact I'd bet that most folk don't realise that a Trade war is an act of violence, economic violence.
12th June 2020 - Machine Intelligence Quantum AI Stocks Mega-Trend Forecast 2020 to 2035!
The higher the tariffs the less trade with others that's both exports and imports. So buyers have less choice and worsening substitutes, americans are going to get a shock to system when they soon see empty shelves.
Contents
Trumpet of the Apocalypse
The Yen Carry Trade
Bitcoin Brief
US Exponential Budget Deficit
QE4EVER
US Interest Rates
Trade War Unintended Consequences
Trump Tax Cuts
Stock Market's Got Anxiety - Panic Attacks!
Stock Market Volatility
AI Stocks Portfolio current state
ASML - Wednesday 16th April - $673 - EGF 29% / 33%, PE Range 53% / 11%
TSMC - Thurs 17th April - $155 - EGF 21%, 43%, PE Range 62% / 26%
TSLA - Tues 22nd April - $252 - EGF -2%, 27%, PE Range 173% / 116%
IBM - Wednesday 23rd April - $239 - EGF 3%, 8%, PE Range 95% / 80%
LRCX - 23rd April - $68 - EGF 14%, 12%, PE Ranges 76% / 60%
Google $158 - EGF +5%, +19%, PE Ranges 16% / -15%.
Who wants to Live for Ever?
Canada's New National Anthem
Trumpet of the Apocalypse
Messiah syndrome - history is littered with 'Messiahs' who were convinced they were doing Gods work and in doing so sought to full fill End Times prophecies so that they and their followers can rapture their fat asses straight to heaven, which is why so many devout christians support Trump despite the fact that clearly Trump is the exact opposite of what the ideal Christian would be i.e. Jesus Christ, more likely in this narrative Trump would be the anti-Christ, still having dodged a bullet he may actually believe that all he does he is destined to do, after all as I have been saying for over a year that Trump has a destiny with ending this bull market with a deep recession that delivers a deep bear market and so far he is definitely living up to expectations.
16th Jan 2024 - Stock Market Election Year Five Nights at Freddy's
Despite what the polls may state it is very possible that a. Trump wins the Republican nomination and b. That he wins the next Election, and then watch what the ANGRY Grandpa does!
You can say goodbye to Ukraine, it's going to be split into two regardless of all of the MSM propaganda that Russia is losing. And say hello to the rise of totalitarian states to capitalise on the chaos that a Trump Presidency would unleash around the world and in America. AI will win the 2024 US election and sow chaos across America for the next 4 years.
We are definitely seeing that chaos manifesting in America and across the world in the form of trade wars resulting in market and economic chaos on par with that of the pandemic that could soon rival that of the financial crisis of 2008, especially as it's coupled with outright threats of annexation of numerous nations, Canada, Greenland, Panama and so on...
Thus many of Trumps statements and actions can be seen through this prism such as Trump calling for all palestinians dead or alive to be removed from Gaza and then the rest of Palestine so that the Fourth Reich plays it's part in fulfilling End Times.
MAGA is a religion and Trump wants to be worshiped! You can already see it in his Cabinet sessions where all that his disciples do is sing his praises of how fantastic he is in everything he does North Korea Dear Leader style.
In terms of the next major war, the Trump regime is literally pushing China into acting to take Taiwan that risks huge global chips disruption that China if intelligent should resist doing so because that would be falling into the escalation trap that the Trump regime has laid out for China i.e. the US wants China to burn bridges instead of build bridges as it is currently doing in the wake of the trade war and thus China attacking Taiwan is precisely what the Trump regime wants China to do. What else would one expect of the anti-christ?
The Yen Carry Trade
The Yen carry trade is an investment strategy used by institutions and investors of all size who borrow in Japanese Yen at ultra low interest rates and then convert those funds into mainly dollars to buy higher yielding assets such as US bonds and stocks where investors seek to profit from the differential i.e. earning far higher yield / profit then what the investor is paying to borrow in Yen as Japan has maintained low interest rates for decades, including at times negative interest rates due to the prolonged economic stagnation and negative demographics. For instance an investor might borrow in Yen at 0.5% and invest in the US 10 year at 4.5%, thus profit from the yield difference. The Yen carry trade fluctuates between as much as $7 trillion that tends to be associated with periods of market FOMO to as low as during a panic unwind tends to deliver, currently the carry trade is estimated at about $4.5 trillion and is of varying duration i.e. from ultra short-term interest rate sensitive debt to longer-term un leveraged positions.
So how does the flight of capital that I have been commenting about manifest itself, it's when the carry trade goes into reverse, investors sell higher yielding assets due to varying factors such as rising Japanese interest rates and convert back from Dollars into Yen to pay back the borrowed Yen and hence one sees the unwind manifest itself with a fall in US asset prices and the dollar, especially vs the Yen as investors sell dollars to buy yen.
(Charts courtesy of stockcharts.com)
The blue lines mark when the trade has reached its maximum which tends to be associated with market tops.
The red lines are when the carry trade unwind has reached it's zenith and tends to be associated with market bottoms.
As one can see it's a flow of money and not a signal, i.e. stocks fall before the yen goes higher because investors have to SELL stocks into dollars that are then converted into Yen to pay back the borrowed yen, or to buy Japanese bonds.
Conversely when the carry trade is being added to the yen tends to fall before stocks rally, as first yen is borrowed, then sold into dollars and then invested in risk assets such as US stocks and bitcoin.
So when it is said that the yen carry trade is unwinding it means that investors across the spectrum who have borrowed in Yen are selling US assets such as stocks into dollars then converting into yen to pay back what they borrowed in yen whilst at the same time there are speculators attempting to capitalise on the unwind by BUYing Yen, Buying japanese assets such as bonds and stocks and SELLING US stocks, bonds and the Dollar. Thus the unwind puts upwards pressure on Japanese and European stocks and bond prices, whilst downwards pressure on US stocks and bonds because flight of capital out of the US puts downwards pressure on Japanese and Euro interest rates where the unwind intensifies if there is upwards pressure on domestic rates as is the case with Japan today.
So similar is true to to a lesser extent in other carry trade currencies such as the Euro and British Pound which is why sterling continues to target GBP 1.40 which has been my target since October 2022 that I tend to reiterate from time to time as my following chart from August 2024 illustrates,
The more the yen goes up the higher will go US bond yields to the point where they reach a level that investors are prepared to lock in yield which as I commented days ago looks like the US 10 year is heading for 5% which was last seen October 2022, and what coincided with US yields hitting 5%? The 2022 stocks bear market bottom!
(Charts courtesy of stockcharts.com)
Which means its going to be tough for the US stock market to rise whilst the 10 year continues to move higher towards 5% which as you can see from the chart is a PANC event underway that fooled many during the recent dip to 3.9% during which i warned that US yields were going to go sharply higher because of the unwind of the carry trade underway in response to a. rising japanese inflation and b. Trump tariffs chaos triggering a flight of capital, so the fall in yield to 3.9% in response to falling stocks prices was a false break lower as it did not align with where the money was flowing to and thus US yields experienced a sharp reversal upwards.
The situation is what it is, US yields are headed higher that has triggered partial reversal in Trumps tariffs madness for which there is a chance that it will stem the tide of capital outflows from US bonds into Japanese bonds but I doubt it, to me the US 10 year looks like it's heading for 5% which means its going to be hard for stocks to push higher, in which respect the big question is was the crash to 4800 enough? There is a good chance that the 20% drop was enough to satisfy US stock selling pressure so stocks can rally to 5700+ which is pending the US 10 year yield topping out and to start trending lower coupled with a weaker Yen which would be a sign that the carry trade is being added to once more and thus lift the S&P towards a new all time high.
Worst case is we get a US bond market blood bath and 5% does not result in triggering investors to add to their carry trades and well for that one needs to look at the lunatic in the White house.
This is the situation as it stands, stocks want to go higher but are being curtailed by capital flight into the Yen and other currencies that awaits exhaustion in the carry unwind trend underway for the opposite to start to happen that will act like wind behind the sales of stock prices sending them sharply higher to a new all time high.
Another manifestation of the fight of capital is the gold price pushing to new all time highs, continuing to target a trend to $3400 and beyond. a real safe haven unlike bitcoin!
Bitcoin Brief
The Gold price going up whilst Bitcoin is going down tells you that bitcoin is no digital gold! Its a risk on asset and NOT a safe haven and hence continues to track the stock market lower reaching a new low of 74.4k, bouncing off support to 84k. The good news is that the downside looks limited i,.e. the only reason its falling is due to lack of speculative interest rather than selling, which does not mean it can't make a fresh low and trade below $70k, just that when the stock market finally does start to rally then Bitcoin looks well positioned for a run to over $100k on break above $86k as it is not a dollar asset, yes priced in dollars but not subject to flight of capital, but is a risk on asset so does await the stock market sell off to end and a rally to north of S&P 5600 to begin.
So bitcoin is in a range of $86k to $74k pending a breakout higher to target $100k+ Where the risk is for a temporary spike lower to below $70k along with another tariff induced stock market panic event..
MSTR is back to tracking the bitcoin price, one can see the rally above $400 was pure FOMO mania, but at least for the time being the price has an orderly trend in line with bitcoin which means bitcoin $100k should equate with MSTR $400, so folk should get at least one more opp to offload.
(Charts courtesy of stockcharts.com)
US Exponential Budget Deficit
The US Congress Budget Office report projects the US deficit as a percentage of GDP being on an explosive trend trajectory which is as a function of the US government borrowing money to spend on consumption resulting in an ever higher interest payments and debt mountain that the Trump regime will worsen due economic distress, higher inflation and tax cuts resulting in the bond market demanding higher yields.
The primary solution to the deficit money printing is to monetize the debt to artificially drive long interests down else risk a bond market collapse due to the weight of debt issuance. However the price paid for this is INFLATION for which there is no end in sight to, it's not just for this decade but literally forever! Net Interest Out lays are on the verge of exceeding the primary deficit for consumption and then it just keeps increasing with each passing year all the way to 30 years from now when it is projected to be 7% of GDP, twice that of the primary deficit resulting in a runaway debt mountain as the debt to GDP chart illustrates.
And remember this is the CBO projecting debt to GDP rising to 175%, going parabolic, actual reality will be far worse, OVER 200% of GDP. The devaluation of fiat currencies is going to be on EPIC scale, what we have seen so far this decade and yet to see is going to be a mere fraction of what's to come given that debt issuance is out of control. This is what happens when nations debt mountains pass 100% of GDP, interest payments start going parabolic and along with it the debt mountain as new debt needs to be issued to pay the interest on existing debt as the CBO itself projects interest payments rising to 23% of spending from current 10%, pure money printing.
So the last thing you want to be invested in is in CASH or cash like assets such as T-Bills and Bonds, yes there is the QE game that central banks can play to drive interest rates lower but that only works for short-term before inflation takes off prompting rate hikes to prevent hyperinflation and hence interest rates over the long run should be heading higher, however by how much and when depends on inflation for which I expect waves of inflation for the whole of this decade, which is in fact a STEALTH TAX on workers not just in America but by virtue of the world still being a part of the US financial system every worker on the planet has to not only be subject to the inflation stealth tax of their own government but also to the US via myriad of interlinked mechanism such as the Eurodollar market and that western governments and central banks at least playing follow the Fed leader, for instance UK rate decisions take place the day after the Fed's so that the Bank of England keeps in step with it's master.
QE4EVER
Not to forget the inflation mega-trend courtesy of rampant central bank money printing to monetize government debt coupled with the fake inflation indices where up until recently the Fed had succeeded in hoodwinking the masses that US inflation was just 1%. Instead at that time I warned it was more like 4%! Now it's more like 7%. Anyway the money printing binge now totals $6.7 trillion, up from $4 trillion at the start of 2020 and down from a a peak of $9 trillion during the so called Taper that the Fed has signaled is ending. We saw how the taper of 2019 went which at the time I warned would eventually resolve in the Fed Balance sheet DOUBLING. of course I was not expecting it to start happening within a few months during 2020!
Quantitative Tightening WAS a smoke and mirrors con trick that the lemmings swallowed, there has been NO QT! The $2.3 trillion of QT that MSM have focused upon has been then OFSET via a myriad of mechanisms foremost of which is the Reverse Repo Market that the Fed engineered to balloon to $2.6 trillion through interest rates manipulation that during 2023 that has now been completely drained to finance US treasury bond purchases and so abracadabra QT of $2.3 trillion actually turned out to be zero!
What does this mean for the stock and bond markets?
It means QE is going to resume with a vengeance due to the mountain of debt that needs refinancing which should send stocks and bonds higher i.e. the Fed will FORCE yields lower so that the debt can be refinanced at a lower rate else America's goose is cooked and all 3 markets, stocks, bonds and the dollar will resume their free fall,
The Trade deficit is financed by the budget deficit without it the US economy would already be shrinking. The only way the US can get rid of the trade deficit is through a severe recession that folk in hindsight will call a Great Depression, which means a worse case outcome for stocks, maybe 2008 style price action. It all depends on how much economic pain the Trump regime is prepared to put the US through before it buckles, already the Trump regime has put stocks 20%+ lower and baked in a recession of sorts where I expect far worse to come down the road when economic pain actually starts to bite and the bond market fails to respond to Fed QE as inflation takes off.
US Interest Rates
Meanwhile MAGA crack heads try and excuse Trump wealth destruction by stating that it's all part of his 4d chess master plan to get the Fed to LOWER US interest rates, well yes the Fed could have done that given that inflation is weaker than expected but because of Trumps tariffs madness the probability for a rate cut is DIMINISHING NOT Increasing as the market demands a moron premium in the form of higher yields as the Fed Watch tool illustrates which only a few days ago was 66% for a cut now 22%, given that there are 3 weeks to go until the 7th May meeting then if things calm down on the tariffs front then there is a chance that the Fed could cut rates, but as things stand Donald Dump has subverted the Fed's ability to cut rates due to the market seeking to levy a moron premium because of much higher inflation in the pipeline as capital leaves the US.
Another problem is the fact that most US bonds are longer duration which means even if the Fed cut interest rates it may do nothing for longer term bond yields as they are focused on future inflation.
The bottom line - the risk of US bond market panic events worse even then seeing the yield rising to 5% remains which if it happens would trigger QE4Ever as the Fed monetize's US bonds to drive down soaring yields the consequences of which would be to send the Dollar sharply lower further eroding the the Dollars reserve currency status turning it into a reverse currency that investors would seek to sell as the Fed prints trillions to buy bonds sending it's balance sheet soaring to well beyond the previous peak of $9 trillion. The fact that the Fed is being forced down this path suggests despite what the CME tool is saying that the Fed could be forced to CUT interest rates this despite the Fed should be thinking about RAISING interest rates!to nip inflation in the bud BEFORE it ramps higher due to Trump tariffs, and if the Fed does raise interest rates then that will be a shocker! We will- see the Orange Apes face turn RED along with the stock prices.
At the end of the day Jerome Powell can't win as on the one hand the Orange Ape will demand the Fed cut the rates whilst on the other hand his tariffs will send inflation through the roof so when the economy tanks he will have someone other than himself to blame for the mess he created.
Trade War Unintended Consequences
Smoot-Hawley Tariff Act of July 1930 raised U.S. tariffs on imported goods, deepened the global economic depression and strained international trade, including Japan's export-driven economy. Japan's invasion of Manchuria followed in 1931 was driven by the need for resources like coal and iron, imperial ambitions, and domestic political pressures from militarists. With the Smoot-Hawley's economic fallout pushing Japan towards aggressive expansion to secure markets and resources.
Today a severe trade war, such as blanket tariffs or sanctions cutting off critical supply chains (e.g., rare earths from China or chips from the U.S.), could lead to economic pain on both sides. that could trigger China to take action over Taiwan such as a blockade followed by U.S. naval response that could spark naval skirmish or broader conflict which may be the outcome the US seeking to engineer.
The thing is trade wars tend to increase the probability for military conflicts. I mean a war between Canada and the US was unimaginable to most only a few months ago, but now Canada is seeking to bolster it's defences and alliances so as to deter the risk of a military conflict with the US which as I wrote over a year ago I saw as an inevitable consequence of climate change.
Next in the maniac presidents cross hairs is the Pharma Industry, tariffs on drugs, what's going to happen? The pharma companies will stop supplying US patients with cheap generic drugs which means huge rise in costs of med's in the US, loss of generics and price hikes on brands as Trump is literally trying to KILL Americans!
Trump Tax Cuts
The market is in a holding phase, what's it waiting for? Some good news which apart from a resolution to the trade war 'should' be Trumps tax cuts of as much as $4 trillion that will send both the deficit and economy soaring into an short-lived inflationary boom which in large part is what the tariffs are meant to finance which of course is not going to happen,The US is not going to collect 145% tariffs on chinese goods, instead what's going to happen is that the supply will dry up and instead inflation takes off. and along with the jump in the deficit will come the probable crash of the US bond market, dollar and stocks which was the time line I was working towards, i.e. we get the pump during 2025 to S&P 7000+ and then the big bad bear that sees stock prices retrace by 50%, instead alls we have got since Trump took office is perpetual BAD NEWS so there is a glimmer of hope that the US economy gets one last debt printing needle stuck into it's arm before it suffers a hard landing heart attack.
Though of course the Trump tax cuts will mostly benefit the rich, corporations and the top 1% of earners. Whilst the middle class will probably see something like 2% extra take home pay whilst those who earn over $1 million get a 5% boost to their take home pay. The billionaires who have bankrolled Trump will be happy for the return on their investment.,
And of course tariffs after the initial shock to the supply chains will help boost some US businesses as competition diminishes and prices go up but the consumer will pay so the extra income from tax cuts will pretty quickly all be swallowed up by price hikes so for most americans the net effect of which will be higher inflation and higher debt and deficit which does not bode well for stock and bond markets!
The bottom line is that the clown in the White house has put the US on the fast track to a deep recession as the tax cut boost will be short-term. It takes a special kind of moron to deliver an inflationary recession courtesy of tariffs, therefore the US is heading for stagflation which as the 1970's illustrated is much harder to recover from than regular recessions that tend to be deflationary i.e as unemployment rises demand and prices tend to fall which thus allows the government to pump money into the economy that is much harder to do during stagflation. The signs for a stagflation will be rising prices, rising unemployment and a falling dollar, all this is visible before the fact, whilst during the fact things will look much worse i.e. there will be no sign of the bottom and folk will be worried about hyperinflation Weimar republic style!
Stock Market's Got Anxiety - Panic Attacks!
A 10% drop is a fun buying opp, a 20% drop is a painful buy the dip, why? Because a 10% drop doesn't change the trend, S&P from peak to trough dropped 21.7% which is supposed to signal a BEAR MARKET, but does it feel like a bear market?
It's more like a series of panic attacks, the stock, bond and dollar markets are all suffering from anxiety, the Moron in the white house has all of us more anxious then we were just a few weeks ago when we had our comfort blanket of a world order that had been in place for many decades so we could rely on stuff like technical's and studies to work so as to make the process of investing easier, not under Trump, all of that's out of the window because chaos rules supreme and thus instead of technical's one needs to focus on where the money is flowing to in the present and where will it flow to in the future. For instance that's a death cross there on the chart, which may have meant something once but not any more, similarly the sharp decline breaking both the August and April 2023 lows is very a bearish technical signal but they mean nothing right now.
Trump chaos rules where a random tweet can send stocks sharply higher or lower.
So yes we have had a technical bear market, but it doesn't matter because the highly anxious markets await some certainty from the Clown house as to whether President Dumbo is going to start behaving like an adult so as to allow the self inflicted chaos to dissipate and the market to digest the fundamentals, until then the risk of further panic attacks remains high were alls we can hope for is that the next panic attack comes off of a higher level which gives room for the price to drop without breaking the previous 4800 low and thus the market starts to form some sort of basing structure.
We all want the sell off to be over so we can sell into a rally towards new all time highs, however as I pointed out earlier there are so many alarm bells going off such as Gold new all time high, 10 year targeting 5% as part of the unwind of the carry trade underway that its very hard to see how stocks can climb to a all time high right now, there are two many cards stacked against such a trend. Even then the probability for a Fed rate cut is low. So stocks are going to remain under pressure until we see a culmination of the unwind such as the 10 year hitting 5%, or if the dollar starts to strengthen which doesn't appear likely right now, i.e. break below 100 targets 90! Where only a surprise Fed rate hike could reverse.
Yes a falling dollar should be supportive of stock prices because they are priced in dollars but if the dollar falls to 90 then that will still be another real terms 10% drop in the S&P even if the index itself stays well above 4800 and maybe even climbs higher to 5700+ where the only advantage to AI stock investors is that AI stocks should go up more than the dollar falls.
The primary reason why what Trump is doing is madness is he both wants the dollar to FALL so that it acts to correct the trade deficit but at the same time threatens others from SELLING the dollar into other currencies.
The US can only have one or the other and not both, else you get what we are seeing, where EVERYTHING is falling due to loss of confidence in the financial system , stocks, dollar and bonds as capital flight takes hold out of US assets into foreign currencies such as the Yen and Euro.
Stock Market Volatility
The vix is supposed to spike which tends to coincide with market lows as was the case August 5th and to a lesser extent during January, this time was different the VIX spiked and stayed in a range above 30 which signaled there was worse to come and it came with a spike to near the same level as August 2024 which is good news. That and the subsequent drop, though with the VIX at 32 we are not out of the woods yet as we want to the VIX to drop well below 30 that would allow for a sustained bullish trend but the spike to 60 is what I was looking for so is good news now it just needs to drop to back below 30 and trend to sub 20.
So alls one can do is be positioned for a further panic event that could take the S&P down towards 4800 i.e. another buy the dip panic event as such dips tend to be short lived as well as have limit orders in place to scale out on a rally to 5800, as it's going to be tough for the S&P to break above 5800 until uncertainty dissipates. If I had to guess what comes next, I'd; say another panic event that holds 4800 before we get the pump to target a test of 5800, so I have buy limit orders in place to capitalise on another dump as well as having limit orders in place to capitalise on a pump to 5800, where the real test will be if we manage to get back above 5850 that would target 6150. And we could even in a few short months be trading at a new all time high, IF the Orange Ape lays off on chaos and uncertainty, as the stock market right now does still want to go higher rather than lower which will eventually change when earnings start to deteriorate in response to economic contraction as we will shortly find out during earnings season.
AI Stocks Portfolio current state
Buying the deep dip down to S&P 4800 has seen my exposure in target stocks increase by significant degree, current state of portfolio is 43.8% AI, 24.4% Medium Risk, 7.3% high risk, 7.1% crypto, and 17.3% cash all whilst going into the sell off I was positioned to do the opposite as the plan was to TRIM into a rally to new all time S&P high to increase cash on accounts to over 30% instead Trump Chaos delivered a second panic event that I capitalised upon, this is the reality of the stock market and why I often state folk should to be positioned for either rising or falling prices which April is an extreme example of. Folk need to maintain cash on accounts and have limit orders already in place to both buy and sell, else they will MISS the opportunities to do either because during such events there is much confusion and doubt, so make your decisions when things are calm i.e. when the market is closed and that when prices are moving fast you don't have the time to act in real time.
Nvidia - My position has gone from 43% invested a few months ago to now 92%, and likely will go higher still following Trumps most recent action. Folk should now understand why at $144 I wasn't buying 100% exposure despite expecting $200+ because one seeks to buy a stock when it is cheap, when at a deep discount from it's high not near it's high as that carries a far higher draw down risk regardless of expectations, no I did not expect to see Nvidia fall to $85, but I was positioned for such an event and even lower than that! This is what investors need to take on board, be positioned for either rising or falling prices, yes there is a limit to what one can do i.e. if a stock keeps falling such as AMD then one will eventually reach their exposure limit. It happens with virtually every stock from time to time, but eventually good stocks come good as AMD has done several times before.
Google from 90% to 110%.
AMD from 119% to 143%, the cheaper it got the more I bought, it's the best one can do without hindsight.
Microsoft from 14% to 30%, one does not get opps to accumulate MSFT often so when the dip came I bought.
META - from 18% to 26%, not as big a jump as with others because it did not go quite low enough in terms of valuations i.e current PE range is 58% which is NOT CHEAP, fair value perhaps. Remember the name of the game is to accumulate when cheap and distribute when expensive, so META at $540 is not cheap.
TSMC - from 24% to 60%, I had sold down TSMC hard so have been waiting for an opp such as this to come along, of course in hindsight everyone wishes they had bought more but alls one needs to do is look at column AC to instantly see what's cheap and what's not, I don't need to waste time looking at price charts, it's all there in one number! Which is what one needs when markets are moving fast, though of course I've set my limit orders weeks ago, and alls the column does is prompt me to act in real time i.e. to buy more.
Qualcom from 103% to 121% - Yes cheap stocks can get cheaper! But as long as one buys when cheap then that's the best one can do without hindsight.
ASML from 85% to 92% - ASML held it's own without much of a further opp to add to.
AVGO - from 0% to 33% - Took a big dump, like winning Willie Wonka's golden ticket, yes I should have bought even more but this is the real world vs folk who look back in hindsight. in fact I already trimmed some AVGO at $185 a sell limit I placed barely a week ago when I bought at $134.
I could continue on down the list, the only AI stock I didn't buy much of was Tesla, why? again look at column AC for why.
Spreadsheet link updated (as happens approx every 3 months) - https://docs.google.com/spreadsheets/d/1mK07kY5f3MBnvR8WRa9OnpszVmOECLbLRV4dAnetmuQ/edit?usp=sharing
Whilst folk have been focused on Trump tariffs chaos earnings season is already upon on is with a number of target AI tech stocks reporting starting with ASML.
ASML - Wednesday 16th April - $673 - EGF 29% / 33%, PE Range 53% / 11%
ASML's bear market in price is similar to what transpired during 2022 though not to the extent of valuations which remain fairly valued at 53% of it's PE range so not dirt cheap but neither expensive as it was when trading some 40% higher. The EGF's are strong which suggest an earnings beat thus a positive reaction, the key thing to look out for is a break above $780 that would target $900+. I doubt ASML can sustain FOMO much beyond $900, still a move to $900+ would give folk an opp to trim recent buys.
(Charts courtesy of stockcharts.com)
ASML is a great stock in terms of accumulating and trimming, giving plenty of opportunities to do both as the recent dip below $600 it was a case of ramping up exposure which now has me at 92% invested that I will seek to trim during the expected rally. to $900+
*** Earnings report update - Earnings beat as expected EPS $6.82 vs $6.12 expected, stock trading down to $634 on nothing burger marginal sales miss, the stock is at fair value at 42% of its PE range, I will be adding at sub $600. Bottom line it's only a matter of time before ASML trades back above $1000 so I see the current sell off as a further opp to accumulate.
The rest of this article continues here - Stock Market Tarrified as President Dump Risks Turning Recession into a Stagflationary Depression
TSMC - Thurs 17th April - $155 - EGF 21%, 43%, PE Range 62% / 26%
TSLA - Tues 22nd April - $252 - EGF -2%, 27%, PE Range 173% / 116%
IBM - Wednesday 23rd April - $239 - EGF 3%, 8%, PE Range 95% / 80%
LRCX - 23rd April - $68 - EGF 14%, 12%, PE Ranges 76% / 60%
Google $158 - EGF +5%, +19%, PE Ranges 16% / -15%.
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Nadeem Walayat has over 35 years experience of trading derivatives, portfolio management and analysing the financial markets, including one of few who both anticipated and Beat the 1987 Crash. Nadeem's forward looking analysis focuses on UK inflation, economy, interest rates and housing market. He is the author of five ebook's in the The Inflation Mega-Trend and Stocks Stealth Bull Market series that can be downloaded for Free.
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