Stock Market Tarrified as President Dump Risks Turning Recession into Stagflationary Depression
Stock-Markets / Stock Market 2025 Apr 21, 2025 - 11:36 AM GMTBy: Nadeem_Walayat
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.
Stock Market Tarrified as President Dump Risks Turning Recession into a Stagflationary Depression
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
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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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