The trade wars just claimed their first victim: Nvidia (NVDA).
NVDA is one of the most important companies in the stock market. The reason for this is that NVDA produces the chips/ Graphics Processing Units (GPUs) that the entire world is using to build out Artificial Intelligence (AI) platforms.
Because of this, NVDA has been a true market leader for most of the bull market begun in 2023. NVDA shares more than tripled in 2024. And at one point, NVDA was the largest company in the world based on market capitalization.
Last night, NVDA reported that it would take a $5.5 billion charge this quarter due to the U.S. restricting its exports of H20 AI chips to China. Roughly 20% of NVDA’s business comes from China, so this is not a small issue.
NVDA shares sold off hard in the after-hours.
NVDA is the first company to “take it on the chin” due to the tariffs/ trade wars, but it won’t be the last. The Trump administration’s chaotic rolling out of its policies has resulted in the stock market as a whole losing some $11 TRILLION in value since late January.
The technical damage to the markets has been severe, to the point that the S&P 500 has just triggered a MAJOR sell signal for the first time since the 2022 top. What followed was a year-long bear market that saw stocks lose over 20%.
If you’ve not prepared for this, the time to do so is NOW before this unfolds.
Indeed, our proprietary Crash Trigger is now on red alert. This trigger went off before the 1987 Crash, the Tech Crash, and the 2008 Great Financial Crisis.
We detail this trigger, how it works, and what it’s saying about the market today in a Special Investment Report titled How to Predict a Crash.
Normally this report is only available to our paying clients, but in light of what’s happening in the markets today, we are making just 99 copies available to the general public.
The stock market is in a free-fall as Wall Street realizes that the Trump administration is serious about restructuring the global economy.
For decades, the dominant theme in trade and macroeconomics was globalization/ offshoring. This trend gutted America’s manufacturing and industrial base, effectively shifting millions of middle-class jobs overseas.
Why did American policymakers do this? What was the benefit to all these jobs and factories disappearing?
Corporate profits would rise as labor/ manufacturing overseas would greatly reduce costs. And since things would cost less to make, they’d sell for a cheaper price in the U.S.
In its simplest form, the political class in Washington told most of America: it’s OK that the factory and your job is gone because stocks will go up and things will be cheaper.
The Trump administration has decided to reverse this in a shock and awe campaign via tariffs. The goal is NOT the tariffs themselves… the goal is to FORCE companies to reopen factories, reshore manufacturing to the U.S.
Team Trump tried to warn that this was coming.
Treasury Secretary Scott Bessent stated point blank that the economy had become “addicted” to government spending and that it would need to undergo a “detox period.” And in a not so veiled jab against globalism, he stated that “access to cheap goods is not the essence of the American dream.”
Commerce Secretary Howard Lutnick went even further, stating, “This is a re-ordering of global trade for the benefit of America.”
And perhaps the single most telling statement was when the President stated, “I haven’t even looked the stock market.”
The stock market FINALLY got the message and has entered a free-fall. Companies that rely extensively on offshore manufacturing have been completely OBLITERATED. Yesterday, Apple (AAPL) which depends on China and other nations to produce its products stock declined 10%.
Nike (NKE) which relies heavily on Vietnam (a nation Trump slapped with a 46% tariff) collapsed 14%.
By comparison, McDonalds (MCD) which sources most of its supplies from within the U.S. went up over 2%!
The message here is clear: in the new Trump economy, there will be clear winners and losers. Those stocks that are globalized will suffer while those that are primarily domestic will succeed.
Those portfolios that are correctly aligned for this be just fine… others, not so much.
On that note, we are putting together a special investment report designed to help investors navigate this new market environment. It’s titled The MAGA Portfolio and it will detail some of the investments that will win as Team Trump moves to restructure global trade.
Copies will be delivered to subscribers of our FREE daily market commentary Gains Pains & Capital. To join now and have your account in place so this report will be delivered to your inbox on Monday…
The tariff wars have officially arrived. And the markets don’t like it.
Crypto currencies are perhaps the best liquidity/ risk on indicators in the financial system. And as I write this, they’re a sea of red.
Bitcoin is down almost 7% peak to trough from Friday afternoon. Other smaller coins are down even more.
And there is little doubt stocks will open sharply down on Monday. The S&P 5o0 fell almost 100 points Friday afternoon when the tariffs announcements hit the wires.
Trump believes the stock market is a barometer for his economic agenda. And while he’s already suggested there will be some near-term pain based on the tariffs… how long will he be willing to stomach a collapsing stock market?
The S&P 500 has a gap down around 5,860. This should prove a likely downside target for this market reaction to the tariffs. What happens then will be key.
Below that is the 200-Day Simple Moving Average (DSMA) around 5,600 on the S&P 500. It is highly unlikely Trump would stomach a break below that.
To start receiving these kinds of actionable insights, join 56,000 readers in over 56 countries in receiving our daily market alert every weekday before the markets open (9:30AM EST).
One of our proprietary measures for the economy is signaling a recession is at hand.
That measure is the Target (TGT): Walmart (WMT) ratio.
Target and Walmart are big box retailers with distinctively different brands/ price points. Target tends to be more consumer discretionary-oriented while Walmart tends to be more consumer staple-centric.
As a result of this, comparing the performance of the two companies’ stocks is a handy way of seeing if consumers are spending more money on discretionary items or if they are cutting back and focusing on lower price goods/ staples.
Put simply, when the TGT:WMT ratio rises, the consumer is strong. And when it collapses, it usually signals that an economic contraction is underway.
See for yourself. This ratio collapsed during the recession of 1990-1992, the Tech Crash/ recession, the Great Financial Crisis and the “close-call” of 2016-2017.
So what is this metric showing us today?
Hint: it’s UGLY.
Sure, this might be a fluke… but given the accuracy of this measure over the last 40 years, I wouldn’t bet on it. Indeed, my proprietary Crash trigger is on the verge of registering a “SELL” for the first time in four years.
This signal went off before the 1987 Crash, the Tech Crash, and even the Great Financial Crisis. And right now, it’s flashing its first MAJOR warning sign in years.
To find out about this trigger, and what it’s saying about stocks today…
Economically sensitive commodities like copper and oil have erased all of their 2024 gains and are now declining rapidly.
Defensive sectors like utilities are soaring… while growth-oriented sectors like Tech are struggling to move higher.
And worst of all, the ratio between stocks and long-term Treasuries has broken its 40-week moving average (the same as the 200-day moving average) for the first time since the pandemic crash!
All of this is EXTREMELY bearish and poses a major warning sign that additional downside could be here soon. Indeed, my proprietary Crash trigger is on the verge of registering a “SELL” for the first time in four years.
This signal went off before the 1987 Crash, the Tech Crash, and even the Great Financial Crisis. And right now, it’s flashing its first MAJOR warning sign in years.
To find out about this trigger, and what it’s saying about stocks today…
This mini-crisis was triggered by the BoJ raising rates for the first time since 2007, which in turn, blew up the Yen carry trade.
I realize that sounds as if I’m speaking in code, so let me break this down.
As I outlined in my most recent bestseller, Into The Abyss, Japan is the grandfather of monetary insanity. The Fed first introduced Zero Interest Rate Policy (ZIRP) and Quantitative Easing (QE) in 2008. Japan’s central bank, the Bank of Japan, or BoJ for short, introduced ZIRP in 1999 and QE in 2001, respectively.
Over the course of the last 20+ years, the BoJ has engaged in a slow-motion nationalization of Japan’s financial system. Today it owns over 50% of all Japanese Government bonds and is the single largest shareholder of Japanese stocks in the world.
All of this worked relatively well until inflation entered the financial system in 2020-2021 and the BoJ refused to address the situation.
The Fed and the European Central Bank (ECB) started raising rates and shrinking their balance sheets in early/ mid-2022. The BoJ only started tightening monetary policy in 2023. And it finally started raising rates at the end of July (as in a week ago).
That’s when all hell broke loose.
The Japanese Yen has been in a free-fall for the last four years as the BoJ refused to tighten monetary policy while every other major central bank was raising rates and draining liquidity. Indeed, going into the BoJ’s rate hike decision a week ago, the Yen was trading at levels not seen since the late 1980s.
Once the BoJ started talking about raising rates, the Yen started moving higher. And last week, when the BoJ actually raised rates, the Yen EXPLODED higher.
This is a globally systemic issue because the Yen is one of the largest carry trades in the world. If you’re unfamiliar with a carry trade, it consists of borrowing money in one currency (at a low interest rate) to invest in other assets.
Since the Yen has been yielding more or less ZERO for the last 20+ years, hedge funds and other institutional investors have been borrowing hundreds of billions of dollars’ worth of Yen to invest in other assets with EXTREME leverage.
The problem with this is that leverage works both positively and negatively.
Imagine you have $1 million to invest and you borrow $10 million in Yen at 0.1%. Your annual interest payments on the Yen are ~$10,000. Meanwhile, you invest that $10 million in stocks, which then rally 10%.
You’ve just made $1.1 million in profits (10% of your $11 million). And since your actual capital is just $1 million, you’ve more than doubled your money with this trade courtesy of leverage.
However, this process ALSO works to the downside when things go wrong. If the currency you are borrowing in (the Yen) skyrockets relative to the currency in which the assets you are buying are denominated (the $USD), your trade will BLOW up quite badly.
In the last month, the Yen/ $USD pair has ripped 12% higher. This, combined with the higher interest rate on the Yen (the BoJ raised rates from 0.1% to 2.5% last week) is BLOWING UP hundreds of billions of dollars’ worth of the Yen carry trade.
When a carry trade blows up, investors are forced to panic liquidate their holdings. That is why the market melted down over the last few weeks with companies like Apple and Nvidia collapsing in share price despite being OBSCENELY profitable.
Which brings us to today.
The BoJ announced a previously unscheduled meeting with Japan’s Ministry of Finance and its Financial Services Agency on Tuesday. This was a signal to the markets that an intervention of sorts was coming.
Soon after that, the deputy head of the BoJ, Shinichi Uchida announced that the BoJ won’t “raise rates if the markets are unstable.” This is akin to the BoJ telling the markets, “we got the message and are standing down.”
The big question now is if the lows are in… or is another round of selling coming? Put another way, was this simply a correction in the context of a bull market… or is a legitimate crash/ bear market is about to unfold.
One the one hand, corrections are common events in which you should “buy the dip.” But on the other hand, once every 10 years or so, a REAL crash/ bear market will hit that will wipe out years’ worth of gains!
So obviously, investors need a tool for determining whether stocks are simply correcting in the context of a bull market… or if a legitimate crash/ bear market is about to unfold.
I’ve developed a tool that takes ALL of the guessing work out of this problem. With just one look at this tool, you can tell whether it’s a good time to buy stocks or not. I detail it, along with what it’s currently saying about the market today in a Special Investment Report How to Predict a Crash.
If you’re looking for a reason why the U.S. hasn’t slipped into recession yet, the answer is simple…
Uncle Sam is propping up the economy. And it’s working… for now
Some items of note:
Since, mid-2021, public sector job growth has outpaced private sector job growth.
Government transfers (social spending) accounted for 40% of the growth in income in 1Q24 and was the single largest contributor to personal income growth in 20 states.
In June, the government accounted for 1/3rd of all job gains.
When you add private sector jobs that are funded indirectly by the government, (healthcare, education) Uncle Sam accounted for 74% of ALL jobs created in June!
As I mentioned earlier, the government is propping up the economy via hiring and social spending. This is why the U.S. economy refuses to break down into a recession despite weakness in the private sector.
Small wonder then that stocks keep ripping higher. The S&P 500 has hit new all-time highs in each of the last five weeks!
Put simply, this is a raging bull market courtesy of an economy that is being propped up abject government spending that is funded by the largest deficit as a percentage of GDP in the history of the U.S. (outside of WWII).
At some point this situation will end… BADLY. But in the meantime, we need to ignore all the doom and gloom and ride this bull market for as long as possible.
Think about the raging bull market that occurred in the early ’00s. The first signs of the Great Financial Crisis appeared in mid-2006. Those who panicked based on this, had to wait another 20 months as the market rose another ~30% before stocks finally began to break down.
Remember, as investors, our job is to make money, not look for any excuse to dump stocks and panic about something bad happening. And as I’ve outlined in recent articles, this means riding bull markets for as long as possible, and then side-stepping bear markets when they eventually hit.
In the very simplest of terms, you need to be invested in stocks, until an objective, verifiable tool (not your feelings or limiting beliefs) tells you it’s time to “get out.”
I’ve developed a tool that takes ALL of the guessing work out of this problem. With just one look at this tool, you can tell whether it’s a good time to buy stocks or not. I detail it, along with what it’s currently saying about the market today in a Special Investment Report How to Predict a Crash.
Over the last week, I’ve noted that Uncle Sam is the economy now.
What I mean by this, is that the U.S. government is spending so much money, and hiring so many people, that the economy is refusing to fall into recession despite weakness in the private sector.
By quick way of review…
Since, mid-2021, public sector job growth has outpaced private sector job growth.
Government transfers (social spending) accounted for 40% of the growth in income in 1Q24 and was the single largest contributor to personal income growth in 20 states.
Put simply, the “fix” is in as far as the economy is concerned. And it’s Uncle Sam, NOT the Fed, sitting in the economic driver’s seat.
The most powerful financial insider in the world, Fed Chair Jerome Powell, confirmed this in a speech at the ECB Forum on Central Banking yesterday.
Some highlights from Fed Chair Powell’s comments.
The budget deficit is very large, and the deficit path is unsustainable.
Debt sustainability should be a real focus going forward, should be tackled sooner or later.
Fiscal policy is a job for elected officials.
The Fed has been told to stay out of politics and they do.
(h/t Bill King)
This is a MAJOR tell from the most powerful financial insider in the world: the Federal Government is the one running the “economic” show right now. And it is issuing a truly jaw dropping amount of debt to accomplish this: the Biden administration is on pace to add $9 trillion in debt in just four years.
See for yourself… the U.S.’s debt load is going parabolic.
At some point, this is going to be a REAL problem. But for those of us focusing on making money from the markets, the important thing to note right now is that the economic “fix” is in. And the Fed’s not going to get in the way.
Small wonder then that stocks keep ripping higher. By the look of things, the S&P 500 will hit a new all-time highs later today.
After all, as investors, our job is to make money, not look for any excuse to dump stocks and panic about something bad happening. And as I’ve outlined in recent articles, this means riding bull markets for as long as possible, and then side-stepping bear markets when they eventually hit.
In the very simplest of terms, you need to be invested in stocks, until an objective, verifiable tool (not your feelings or limiting beliefs) tells you it’s time to “get out.”
I’ve developed a tool that takes ALL of the guessing work out of this problem. With just one look at this tool, you can tell whether it’s a good time to buy stocks or not. I detail it, along with what it’s currently saying about the market today in a Special Investment Report How to Predict a Crash.
Yesterday, I noted that Uncle Sam effectively is the economy… for now.
What I meant by this is that the government is hiring so many people and spending so much money, that it is stopping the economy from rolling over into a recession.
By quick way of review…
Since, mid-2021, public sector job growth has outpaced private sector job growth.
Government transfers (social spending) accounted for 40% of the growth in income in 1Q24 and was the single largest contributor to personal income growth in 20 states.
It is VERY difficult for the U.S. economy to roll over into a recession with this going on. But this economic “prop” is coming at a cost.
The U.S. is issuing a staggering amount of debt to hire all these people and pay out all this money. The Biden administration has already added $7 trillion in new debt and is adding a new $1 trillion in debt every 100 days.
Put simply, assuming President Biden completes his first term, he will have presided over the largest debt expansion in U.S. history: a jaw dropping $9 trillion.
At some point, this is going to be a REAL problem, particularly when you consider that a massive amount of debt that was issued when rates were around zero will come due in the next 24 months.
With rates now over 5%, the U.S. will be forced to pay a lot more money in interest payments when it goes to roll over this old debt.
How much more money?
Interest payments on the national debt are expected to clear $870 billion this year and $1 trillion in 2025. That would make interest payments the single largest government outlay.
In very simple terms, starting next year, Uncle Sam’s will be paying his debtors MORE than he pays Americans via social security.
How will this play out? That remains to be seen. But one thing is clear: all this money printing is stopping the U.S. from rolling over into recession. And this is boosting stocks.
To whit, the stock market has hit a new all-time highs in four of the last five weeks. This is a RAGING BULL of a market, and investors NEED to ride it for as long as possible until the music stops.
Why?
Because when the next recession hits, the market will lose 20%-30% and be DEAD money for at least nine months.
After all, as investors, our job is to make money, not look for any excuse to dump stocks and panic about something bad happening. And as I’ve outlined in recent articles, this means riding bull markets for as long as possible, and then side-stepping bear markets when they eventually hit.
In the very simplest of terms, you need to be invested in stocks, until an objective, verifiable tool (not your feelings or limiting beliefs) tells you it’s time to “get out.”
I’ve developed a tool that takes ALL of the guessing work out of this problem. With just one look at this tool, you can tell whether it’s a good time to buy stocks or not. I detail it, along with what it’s currently saying about the market today in a Special Investment Report How to Predict a Crash.
The most important thing for investors to understand about the economy is that “it is different this time.”
We’ve already assessed how multiple previously accurate recession indicators (yield curve inversion, Sahm Rule trigger, etc.) have registered false positives in this cycle.
Why is this happening?
For one thing, the U.S. has never voluntarily shut down its economy. It’s also never pumped $11 TRILLION (an amount equal to over 50% of GDP at the time) into its financial system in the span of 20 months.
But surely both of those items have been factored into the data by now, right?
Sure, but you also have to consider that the money printing/ spending, hasn’t stopped! The U.S. is currently running the largest deficit as a percentage of GDP outside of WWII.
It is VERY difficult for the economy to roll over into recession with this going on. Indeed, in many ways, the government IS the economy right now.
Since mid-2021, job growth in the public sector/ government (red line in the chart below) has outpaced that in the private sector (blue line in the chart below).
The government isn’t just hiring, either. It’s also putting out gargantuan amounts of money via social spending. As E.J. Antoni notes, 40% of the growth in income in 1Q24 was from government transfers (read: spending). Indeed, government transfers were the SINGLE largest contributor to personal income growth in 20 states!
So Uncle Sam isn’t just hiring… he’s also handing out money by the tens of billions of dollars!
Again, it’s VERY difficult for the economy to roll over into recession with this going on. I’m not saying this will work forever. But we need to see the private sector absolutely collapse to overcome all these government interventions in order for the economy to roll over into a REAL recession.
After all, as investors, our job is to make money, not look for any excuse to dump stocks and panic about something bad happening. And as I’ve outlined in recent articles, this means riding bull markets for as long as possible, and then side-stepping bear markets when they eventually hit.
In the very simplest of terms, you need to be invested in stocks, until an objective, verifiable tool (not your feelings or limiting beliefs) tells you it’s time to “get out.”
I’ve developed a tool that takes ALL of the guessing work out of this problem. With just one look at this tool, you can tell whether it’s a good time to buy stocks or not. I detail it, along with what it’s currently saying about the market today in a Special Investment Report How to Predict a Crash.
Everywhere you look, people are calling for a recession to hit. In fact, many big name investors and gurus have been calling for a recession for most of the last two years.
During that time, stocks have gone up 50%.
The primary reason people are calling for a recession is that a number of signals that have previously predicted recessions are once again flashing “danger.”
For instance, the yield curve has been inverted for nearly two years. Historically a yield curve inversion followed by a subsequent dis-inversion has predicted every recession since 1980.
You can see this clearly in the chart below. Anytime the blue line broke below 0, the yield curve was inverted. You’ll note that recessions (grey bars) hit soon after the yield curve became dis-inverted (the blue line broke back above 0).
Looking at that chart, many investors believe it’s time to dump their stocks and prepare for a recession and market crash. However, there are two problems with using this metric to invest in stocks today.
1) The pandemic and its economic impact messed up the usefulness of many metrics including the yield curve.
2) Stock returns vary dramatically during yield curve inversions.
Regarding #1, the pandemic/ economic shutdowns and subsequent Fed/ Federal Government interventions have never happened before. Never before in history has the economy been shut down. And never before has the Fed/ Federal Government pumped $11 TRILLION into the financial system in the span of 20 months.
Put simply, our current economic environment is completely different from every other environment in which the yield curve inverted. Case in point, today the Fed is talking about cutting rates while the economy is growing and inflation is falling.
That was not the case when the yield curve inverted in 1980, 1988, 2001, 2007, or 2019. So again, the pandemic messed up a lot of economic metrics that have been accurate in the past.
Which brings us to #2 in our list above: stock returns vary dramatically during yield curve inversions.
Stocks returned anywhere from -38% to +16% during the last five yield curve inversions. That is QUITE a range of returns. And it negates the usefulness of investing based on what the yield curve is doing.
Think of it this way… if someone approached you and said, “if you use this investing trick, you either lose 38% or make 16%,” you’d tell them to take a hike.
Well, that’s what stocks have returned during yield curve inversions.
As investors, our job is to make money, not look for any excuse to dump stocks and panic about something bad happening. And as I’ve outlined in recent articles, this means riding bull markets for as long as possible, and then side-stepping bear markets when they eventually hit.
In the very simplest of terms, you need to be invested in stocks, until an objective, verifiable tool (not your feelings or an inaccurate economic metric) tells you it’s time to “get out.”
I’ve developed a tool that takes ALL of the guessing work out of this problem. With just one look at this tool, you can tell whether it’s a good time to buy stocks or not. I detail it, along with what it’s currently saying about the market today in a Special Investment Report How to Predict a Crash.
I warned time and again that the Fed was making a massive policy mistake that would unleash another round of inflation.
By quick way of review, the Fed stopped raising interest rates in July 2023. It then started talking about cutting interest rates in November. This was a MASSIVE mistake as inflation has NOT been defeated.
Indeed, ever since the Fed started talking about cutting rates, the official inflation measure, the Consumer Price Index (CPI) has bottomed and is now turning back up.
This trend continues. Yesterday, the Bureau of Labor Statistics (BLS) revealed that CPI rose 0.4% Month-over-Month (MoM) and 3.5% Year-over-Year (YoY) in March 2024.
This represents the FOURTH straight month of CPI coming in hotter than expected. The fact it surprised Wall Street and most investment strategists confirms that NONE of these people are paying attention to the data.
The only part of the inflation data that is down is energy prices (and used cars which receives almost no weight). Every other segment of the CPI continues to rise.
See for yourself:
However, even Energy prices will begin turning up again… as are commodities in general. Both gasoline prices and copper prices are on the rise and about to break out of multi-year consolidation periods.
This is going to catch most investors offsides… but the good news is that with the right investments, you could see EXTRAORDINARY returns from what’s coming.
On that note, we recently published a Special Investment Report detailing three investments that will profit from this rampant government spending. Normally this report would cost $499, but we are giving copies FREE to anyone who joins our daily market commentary.
Copper, the commodity
with a PhD in economics, has erased all of its year to date gains. It’s
currently about 10% off its 2022 lows which marked the low for risk assets
before this current bear market rally began.
It’s a similar story
for oil, which is just slightly off its 2023 lows and down 46% from its 2022
highs.
Steel doesn’t look good trading at new lows for 2023.
Ditto for aluminum.
As well as lumber.
Is this demand
destruction? Or is it the result of the Fed tightening monetary policy and
taking out some of the froth from the financial system?
The bond market
suggests its demand destruction. The 2s10s, which has predicted every recession
since 1955 is suggesting a severe recession is coming.
What do you think this
will do to stocks?
If you’ve yet to take steps to prepare
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