Dear Reader,
Happy Friday! TGIF.
Today I want to do a broad overview of how I’m looking at this market.
The good news is that the market is almost back to where it was on April 2nd, the day Trump announced his Liberation Day tariff policies.
This market has made up a lot of losses since that happened.
A lot of my friends are saying, “look, see? We told you everything was going to be fine. Everything’s great!” yada yada.
That’s great.
I’m just not wired to be super optimistic or super pessimistic on anything.
I look at facts and am dispassionate in my analysis. It’s just the way God made me.
So, let’s do a quick review of the positives and negatives, so you can see what I’m seeing:
On the positive side, news broke that President Trump announced a trade deal with the U.K.
A “comprehensive deal,” which is great.
It’s a small win, but it is a win.
I’ve always viewed the U.K. in this situation as that desperate girl who just wants your attention.
Getting a date with her is awesome, but it’s not the greatest thing in the world.
Anyway, another bit of positive news, Treasury Secretary Scott Bessent is headed to Switzerland. He’s probably in Switzerland now, talking to China.
That’s also positive.
China has sent out signals they want to talk about fentanyl.
They’re asking our administration, “what exactly do you want us to do with this fentanyl problem?”
So I do think they took him seriously about his desire to stop the fentanyl. I’m very happy about that.
We’re flexing our economic leverage to do what’s right for our country, and that is a very good thing.
Thirdly, on the positive side, the economy’s first quarter was pretty strong.
We see strong earnings in companies like Meta, Microsoft, Amazon.
We see strong earnings and demand for AI.
But listen, guys, even if President Trump dialed back tariffs…
Right now they’re at 145% on China…
Even if we dialed them back to 50%, which I think the market’s kind of banking on right now, it would still be the largest tax increase since the 1960s.
It would still take maybe 2-3% off of economic growth. Which is huge.
Billionaire Paul Tudor Jones – a serious man – I only talk to you about serious people with deep insights who have made a lot of money investing over time and don’t let politics muddy their investing views…
He said, “we’ll probably get to new lows even when Trump dials tariffs back to 50%.”
I tend to agree with that.
I think that the float up in the market has been on low volume and mostly retail investor-driven.
Goldman Sachs wrote in a note to their clients recently that history shows that bear market rallies like this “didn’t mark the trough in their respective bear markets.”
That’s my experience, too.
I think specifically about 2008, 2009…
Remember I was the guy in late 2006 saying, “this market is just insane… this housing market’s crazy… it’s gonna blow up,” etc.
I was like that guy talking to himself that people laugh at.
That’s fine. People get it when they get it.
But I remember during 2008 as the market started to go down, we’d see rallies for a month or two.
The Fed would lower rates, for example, and the market rallied.
It would make up for the losses that happened before the Fed lowered rates.
Wall Street and the investing public did not fully perceive the dynamic at play, which was concerning to me.
And of course the market ended up going down.
It went from 16,000 to 12,000 to 10,000. And of course, March 6, 2009, dropped to around 6,500.
Which was the best day of my investing life.
As investors were getting crushed, I got to buy things really cheap.
It was great for me.
Now, the Royal Bank of Canada pointed out that when you look at positioning in the options market it shows a lot of skepticism that this rally will last.
You have retail investors going all-in, and professional investors saying, “we don’t trust this rally.”
I’m not Zoltar, the future reader.
Only time will tell how this works itself out.
What I can say is that based on math, philosophically, even if President Trump cut the tariffs on China by half, we’d still see the largest tax increase since the ‘60s.
The big, beautiful tax cut bill he’s passing through isn’t really necessarily a cut.
It’s an extension on existing cuts. Which I think is fine.
It’s not a new cut. It’s not going to juice the economy as much as people might think.
My point is, it’s nice to be optimistic…
It stinks to be pessimistic.
I know people in my profession who think every day that the world’s coming to an end.
That’s all they do – “the world’s coming to an end! The sky is falling!”
That’s silly to me.
It’s equally silly to be always optimistic.
We want to be realistic.
We’re talking about our retirement accounts.
This is money that’s going to set us up and our kids up.
I can’t afford to be overly optimistic.
I can’t afford to be super pessimistic.
All I want to do is be realistic.
The reality I see tells me to be patient…
See how this unfolds.
Don’t get caught up in the euphoria.
That would be a mistake.
Happy days are not here again.
The worst crisis in the world is not here again.
The truth will be somewhere in the middle.
Have a wonderful weekend.
“The Buck Stops Here,”
