Financial markets sell off on tariff fears … Mexico blinks first … the list of assets that have hit all-time highs recently … which of those gains are illusory Just minutes into trading Monday morning, all three major stock indexes were deep in the red as the world reacted to President Trump’s tariffs that go into effect tomorrow morning. The new levies included 25% tariff on imports from Canada and Mexico, with a lower 10% charge on Canadian oil, natural gas, electricity and other energy products. Chinese products also face a 10% tariff. Stocks were selling off for three primary reasons… First – uncertainty. Wall Street hates not knowing what’s on the way. The duration, scope, and global reaction to these tariffs are a big unknown. Second – fears of reduced earnings. Tariffs increase the risk of kneecapping corporate bottom lines as sticker-shock causes price-conscious consumers to fold up their wallets. Today’s stock valuations require strong earnings growth. Without them, prices will appear far too overextended. Third – inflation. The consumers that do buy at elevated prices are fueling an inflationary cycle, potentially triggering even higher prices to come. By mid-morning, it appeared the day’s losses would snowball into something rather nasty. But then, one concession… Around 10:30 AM Eastern, news broke that Mexican President Claudia Sheinbaum has ordered a troop deployment to the U.S./Mexico border. In response, U.S. tariffs on Mexican goods are now paused for one month. From President Trump: I just spoke with President Claudia Sheinbaum of Mexico. It was a very friendly conversation wherein she agreed to immediately supply 10,000 Mexican Soldiers on the Border separating Mexico and the United States. These soldiers will be specifically designated to stop the flow of fentanyl, and illegal migrants into our Country. We further agreed to immediately pause the anticipated tariffs for a one-month period during which we will have negotiations headed by Secretary of State Marco Rubio, Secretary of Treasury Scott Bessent, and Secretary of Commerce Howard Lutnick, and high-level Representatives of Mexico. I look forward to participating in those negotiations, with President Sheinbaum, as we attempt to achieve a ‘deal’ between our two Countries.” The reaction on Wall Street was immediate, with stocks reversing and paring their losses. The news is fueling hopes that tariffs are simply a bludgeoning tool that Trump will use briefly and sparingly to prompt action from foreign governments. If that is the case, the risk of reinflation or stunted earnings diminishes. As I write at lunch, we haven’t seen a similar reaction from Canada. Instead, on Saturday, Prime Minister Justin Trudeau announced Canada will retaliate with its own 25% tariffs on an array of U.S. imports. Bottom line: An enormous game of financial “chicken” just began, and while Mexico swerved, the U.S. and Canada are still barreling toward each other. | Recommended Link | | | | According to the man who predicted the ’87, dot-com and 2000 crashes, you have just days to prepare for a historic turning point that could double your money 6 different times – with the same strategy he’s used to see 18 different gains of 10,000+%. See his outline and 4 free recommendations here. |  | | Turning to more positive news, if the “January Barometer” plays out, we’re in for another year of market gains Despite experiencing volatility through mid-month, the S&P rallied to end January 2.7% higher, and history tells us that’s great news for the rest of 2025. Here’s Ryan Detrick, chief market strategist at Carson Research: An effect widely known as the January Barometer looks at how January does and what it may mean for the next 11 months. It is known by the saying, ‘So goes January, goes the year’ in the media… Historically speaking, when the first month was positive for stocks, the rest of the year was up 12.3% on average and higher 86.7% of the time. And when that first month was lower? It was up about 2.1% on average and higher only 60% of the time. Below is a chart from Detrick beginning in 1950. The outperformance stemming from a positive January is enormous. 
Source: Carson Investment Research / @ryandetrick Clearly, signs look positive for more growth in 2025. As you know, the S&P notched a fresh all-time two weeks ago. And based on this indicator, we’ll be toasting a new all-time high in 11 months. But let’s pull back the curtain on the difference between a stock market “all-time high” and an “all-time high” in your personal wealth First, the good news… It’s not just stocks that have been surging to record highs. Look at the list of recent winners: - S&P 500: all-time high last month
- Bitcoin: all-time high last month
- Gold: all-time high as I write (more on this shortly)
- Cocoa: all-time high last year
- Silver: 12-year high last October
- Residential homes: all-time high last summer
Great news, right? Well, let’s take a closer look. When we think about price, we think about the value of an object – say, real estate – represented in dollars. The unspoken implication is that what’s changing is the inherent value of the real estate. The dollar is the sturdy, fixed point in this comparison. The North Star. So, when a home price rises, the default assumption is that the movement reflects the value of the home itself, since the trusty dollar is our stable point of reference. But what if it isn’t the value of the real estate changing, but the dollar itself? Said another way, what if the value of the real estate is largely the same, but the dollar itself is weakening? In that case, it makes sense that all these assets would be hitting all-time highs. Why wouldn’t they? Their unit of measurement is collapsing, so “up” has a natural bias in the asset’s value. As you know, that’s exactly what’s been happening for decades as our government has printed trillions of dollars, eroding the value of our currency. So, let’s look at these all-time highs a different way, using a different point of reference. Which one? Well, how about, gold, which is notching a new all-time high as I write. Here’s CNBC: Gold prices hit an all-time high on Monday, bolstered by safe-haven inflows after U.S. President Donald Trump’s tariffs on Canada, China and Mexico added to concerns of inflation that would dent economic growth. If gold is our constant – not the U.S. dollar – a different story emerges… Phantom all-time highs We’re about to look at charts showing the ratio of an asset’s price relative to the price of gold over the last 20 years. If the beginning value is roughly the same as the ending value, that means the value of that asset remained relatively constant with the value of gold. If the line slopes up, that means the value of the asset has appreciated relative to gold. And if the line slopes down, that means the asset’s value has fallen relative to gold…which would suggest that any all-time high that the asset notched during this period would be nominally accurate, yet a wealth illusion. With that in mind, here’s the average stock’s value (the S&P 500 Equal Weight Index) measured in gold over the last 20 years. 
And homes? 
And even though corporate bonds haven’t been hitting all-time highs, let’s throw them into the mix since they’re an enormous asset class. 
Let me throw in one more that you might not expect… | Recommended Link | | | | A switch was flipped last September that could rapidly accelerate a massive global economic shift. The NYT says it will: “split history into before and after.” No matter where you live or what you do it will have huge implications for you. Click here for 3 steps to prepare. |  | | “Tech” has been the place to be for decades You’ve either been in tech funds or you’ve lagged the market. Given this, let’s look at the Technology Select Sector SPDR ETF (XLK), which is a proxy for “tech.” Though its holdings have changed over the years, the current largest weightings include Apple, Microsoft, Nvidia, Broadcom, Oracle, Salesforce, and Oracle. Clearly, this is a blue-chip tech fund. Below, we look at the ratio of XLK to gold over the last 25 years, beginning in 2000. To be fair, that was the height of the Dot Com Bubble. Nevertheless, here’s the reality… 
This is why your net worth is probably at or near all-time highs today, yet your monthly budget feels more strained than it has in years. It’s also a good reminder why gold is a critical part of any portfolio – especially as Trump’s new tariffs risk fueling inflation. Now, for added perspective, here’s XLK to gold over the last 20 years (not 25). Clearly, tech is where you want to be as far as stocks go. 
This chart is a critical reminder that if you want to achieve major wealth, you need the extra horsepower of top-tier stocks. Regular stocks won’t do it. Given how quickly our dollar is collapsing, the inflation-adjusted return of the average stock isn’t going to create the escape velocity needed to achieve financial independence. Broadly speaking, tech is your best bet. As I write Monday, the Nasdaq is still down more than 1% on tariff fears. Perhaps not a bad time to go looking for opportunities. We’ll keep you updated here in the Digest. Have a good evening, Jeff Remsburg | 
ليست هناك تعليقات:
إرسال تعليق