πΆπΌ The U.S. is Getting "Soft" ?
Good morning investors!
Last week, the stock market rose 4.6% on the news that President Trump is softening his stance on tariffs to China and said he has no plans to fire Federal Reserve Chair Jerome Powell.
However, there is a mismatch between the narrative that immediately built among investors and news outlets. Let's look at what was reported vs. what was said.
Reported:
The day before Guo's remarks, Trump had expressed optimism about making a deal with China and said he had a good relationship with the Chinese president, Xi Jinping.
He also said he expected "very high" tariffs on Chinese imports will "come down substantially, but it won't be zero." (Newsweek)
Here's the issue I have with this: Every news outlet posted 90 second clips of a nondescript press conference with President Trump, and not a single one would either link to the full interview session or mention the context around the meeting. As a result, it took me 10 minutes of digging to find it. It turns out that this was a Q&A following the swearing in of the new Chairman of the SEC. The full video can be found here.
While there is too much dialogue to transcribe for a newsletter, I'll summarize my findings after listening to the full Q&A session.
- Trump is asked about negotiations with China, to which he dodges the question and instead goes on about how strong our country is with our current tariffs in place of 10%-25%. This clip is not surfaced in any media coverage of the session.
- The President is then asked if he will play "hardball" with China by "mentioning COVID," to which Trump says he is not goign to play hardball by mentioning COVID, but that "they need to make a deal," and if they do not, "we will set the deal." This clip got turned into headlines like "Trump Says He Won't Play Hardball on Trade." (Axios)
- President Trump is then confronted with Treasury Secretary Bessent's remarks that the current China situation is unsustainable, to which Trump agrees that in the context of a deal being made, tariffs will come down substantially. This clip got the most attention and got spun into headlines like "White House Considers Slashing China Tariffs to De-Escalate Trade War." (WSJ)
In light of this coverage, the market rose over 2% on the day these headlines started rolling out, and continued to end the week up 4.6%. However, I remain very skeptical that any market rally will last through this trade war, and continue to wait for volatility in the market to come down. And this isn't the only time that media coverage of Trump's economic policies have been spun across the board in a seeming effort to boost the stock market. I will continue to point out these discrepancies as I have here and here.
Anyways, let's take a look at the market.
Market Update: Lower for Longer
Year to date, the S&P 500 is down 6.05% while the tech-heavy Nasdaq is down 7.56%. This is interesting because much of the decline in stocks is attributed to the implementation of tariff policies, which intuitively one would expect to not have a large impact on tech companies. However, not all tech companies are created equal. Some like Meta primarily offer software that is not subject to tariffs, while others like Apple or Nvidia sell hardware that is subject to these taxes on trade.
While equities have rallied from their lows earlier in April, we will likely see further downward pressure on stocks the longer we remain in a trade war. Additionally, the economic data was starting to trend negatively before this war even started, which could mean that even if we resolved this economic uncertainty next week, the U.S. was headed for a recession either way.
I continue to hold most of my assets in U.S. Treasuries, Corporate Bonds, Gold, and rental properties as I wait for volatility to come down and for my buy-the-dip indicator to trigger on the S&P 500, at which point I will reallocate to stocks.
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See you next week.
-Brian
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