Dear Reader,
Good morning. Today I want to answer a question a lot of you have written in…
Why is the market going down?
Sometimes I take for granted that I’ve been doing this a long time and live in the finance world and I’m in this all day long…
And forget that not everybody understands what’s happening here.
So I wanted to answer this for you.
The market has been rocked lately because of trade policy.
We’ve slapped 25% tariffs on Canada and Mexico, which means the average car, for example, is going to get a lot more expensive.
A $30,000 car, when you add a 25% additional cost, goes up by $6,000.
An SUV could be $20,000 more expensive.
And we’ve also now slapped 20% tariffs on Chinese imports.
That means couches, televisions, clothing, computers, virtually everything you buy at Target or Walmart is going to now be 20% more expensive.
That includes iPhones that come from China. If they cost $1,000 pre-tariff, they’ll cost $1,200 post.
When the same product you bought last week is now 20%-25% more expensive this week, you get less bang for your buck, and that puts a lot of pressure on consumers.
Think about Mexico – avocados come from Mexico. Guacamole is going to be 25% more expensive. You add guac and that $4 charge is now $5.
Your dollar is going less far, and that’s just the bottom line.
Since consumers drive spending, and drive 66%, almost 70% of economic activity, consumers are going to have less money to spend.
So economic activity is going to slow down, and that’s not great.
Now, I’ve heard some people say that tariffs aren’t inflationary.
That’s fake news.
It’s disinformation, counter propaganda.
As Warren Buffett said in an interview this week, of course they are inflationary, “Over time they are a tax on goods. I mean, the Tooth Fairy doesn’t pay them!”
So that’s why the market’s been going down lately – investors think consumers will have less money to spend on products made by American companies, which will send their revenue and profit down.
There are exceptions of course. Companies facing tariffs can choose to absorb them.
For example, Apple could choose to hold the price of the iPhone at $1,000 and not pass that extra cost on to consumers.
But that also hits the stock market because doing so causes Apple’s profits to go down. Or Ford’s profits, GM’s profits.
Also, we sell a lot of products into China. We sell liquor into Canada and they’re boycotting our liquor, so that will hit American companies, too.
So there’s a lot of nerves in the market, understandably.
There’s also a lot of pockets of strength.
When we look at defense, Trump’s Iron Dome – a $2.5 trillion project coming up.
That’s going to be really strong for defense companies involved.
Here’s the real reason Trump wants to build an Iron Dome, and the companies behind it.
Europe just announced a $500 billion fund for defense as well.
There are pockets of strength, and, the Pentagon is basically going to hand us a win on a silver platter in a lot of the stocks we recommend in Breakthrough Wealth.
The point here is, I’ve been doing this for almost 35 years and when you do something for decades you learn a thing or two about a thing or two.
You know, just like in your own profession, you do something 30, 40, 50 years and you learn the ins and outs.
That’s what the gray hair is for.
And one of the things I’ve learned is when the market starts to sell off and I feel good about the companies I own, I don’t want to do “future tripping”…
I don’t want to say, “Omg! The world’s coming to an end! I’m going to be homeless! My retirement plans are done for!”
No Future Tripping!
This is just a storm.
It’s a rainstorm. It may feel like a hurricane, like during the Covid crisis. But it’s a storm, and it’ll pass.
What we’ve done here, across all our services…
By the end of 2024 we sold companies that we felt like if the stock market disappeared, we wouldn’t want to own.
Now we’re recommending and holding companies that if the stock market just went silent for five years, those companies would be better off five years from now than they are today.
Over time companies like these go up.
Little blips like we’re in right now get smaller and smaller in the context of time.
All you have to do is zoom out.
Don’t future trip. Don’t panic. Pull the camera back. Think about time, duration.
Over time, we are going to be just fine.
And I believe, in terms of policy, that Trump is trying to rebalance trade. The American people voted for that.
That’s what being in a democracy means. We accept what the American people voted for, whether we agree or not.
I get a lot of mail from people who think we’re destroying the country, and look, I understand both sides of it.
I’m an investor. As such, I have to really try to see all sides.
And the best thing that happens in a market like this is it creates opportunities. Great opportunities!
I want to direct you again to Midnight in America because frankly it is my mission to help my readers get through this choppy market the same way I’ve helped my family and friends make a killing during crashes.
I’ve really outlined exactly what’s going on under the surface of our economy so that you can understand what’s coming and what’s causing it – things that predate Trump and that are, unfortunately, unstoppable.
I want you to take these four steps before the market really does crack.
I’m giving you the exact playbook I used in 2009 that catapulted my wealth.
I apologize – this isn’t an infomercial but this is just the right tool you want in a situation like this.
If you haven’t read it yet, go get your free copy of Midnight in America.
“The Buck Stops Here,”
P.S. I’m having dental surgery today, so when you see me tomorrow I’m going to be banged up on the right side of my mouth. Grateful to roll right into the weekend after that!
