4-1-25-SPX

Today is when President Trump announces his plan for tariffs. Do I know which way the market will run, NO, and neither does anyone else. But it should be interesting to say the least.

The first quarter is behind us, and what a lousy quarter it was. The 5th fastest 10% correction in 75 years, tech is on its knees, tariffs, tariffs and more tariffs. Next thing you know, as was said in Ghostbusters, “dogs and cats will be living together”. What is an investor to do? Well, get used to it. That is computerized program trading at its best, 85% if not more, of all trading is being done by an algorithm. 

So why were the algorithms selling off? Tariffs, no doubt about it. Am I unhappy about it? NOT AT ALL. If we do not take serious measures to control our ever-ballooning debt the first quarter of 2025 will look like a cake walk in the next bear market. If our debt implodes you could see the market drop 50-60% in no time. You say that can’t happen, please review the 2008 financial collapse.  We are going to have to take some strong medicine to control our spending and increase revenue.

Reducing spending and increasing revenue are the only two ways for this to happen. And raising tax is one of the reasons we are in this situation, because tax increases have only encouraged our elected officials to engage in even more wasteful spending and not reduce debt.

Let’s play what if.

What if tariffs work? If we are paying 25% in tariff to a foreign firm and we start charging them 25%, what if we both stop charging a tariff? That means 25% stay with our domestic firm, which dramatically increases earnings per share.

What if we can reduce taxes and still pay down our debt?

What if we could drop capital gains tax from 20% to 15%, or maybe even 10%?

I could go on for a long time on the what if game.

But any one of these what ifs could send the market into one of the strongest moves up ever seen. As Tom Lee said the other day, it could be a face ripping rally to the upside. 

Now what could go wrong?  Inflation, recession or stagflation. So do I know the outcome? No, and neither does anyone else. What I do know is that what we have been doing in the last twenty years is not working, our debt is through the roof and growing to an unsustainable level.

Let’s talk about the market, I think we are close to the bottom as the markets have retested the low set on 3/13. Volatility here is a little bit longer as investors try to wrap their arms around the situation. One thing I do know is this will pass, and a new uptrend will emerge. I’m still holding to my prediction that the S&P 500 will close above 6700 by year end, and I bet nobody even remembers the first quarter of 2025.