Weekly Market Bites

end of week markets update

1) US Markets have recovered a little, but are still down for the year, while international stocks and gold continue to do pretty well.

There a lot of unknowns about what’s gonna happen next. With Trump’s tariff war, reactions from other countries and how that’s gonna play out in the markets.

This weeks post is my best attempt at putting together what the famous Trump administration 3D chess might be all about (if it exists at all).

Before that, here’s a summary of markets year to date:

2) April 2 - “Liberation Day” 🧨 

(Just a heads-up: Anything I say on Trump related topics isn’t about endorsing or rejecting his policies. I’m simply trying to understand what’s being done and what it means for the economy and financial markets.)

The Trump administration isn’t just dabbling in tariffs.

They’re all in (if we take them seriously) 🔥 

Bringing manufacturing back to the USA

On the surface, it sounds like a no-brainer right? Bring jobs home, boost American industry. Easy win, right?

So why hasn’t it been done before?

Because the U.S. economy isn’t built that way anymore.

The U.S. economy is a services and consumer based society, primarily, since the 1980s.

• Cheap goods and services = more spending.

• More spending = economic growth.

That’s why the U.S. leans into high-value industries, finance, tech, law, real estate, IT, etc.

And outsources lower-end manufacturing. Because cheap stuff keeps costs down, which kept wallets open. And in a consumer-driven economy that’s the playbook.

Now, normally when a country imports way more than it exports, its currency weakens. But not the U.S. where the USD has only gotten stronger right?

The magic is that the world keeps pouring money into U.S. assets (stocks, bonds, real estate). And this demand keeps the dollar strong and as the world’s reserve currency.

And being the world’s reserve currency = big advantage.

• It allows the U.S. to run huge fiscal deficits without worrying about demand or devaluation of its currency.

• It gives Washington an economic superpower status.

The Big Problem: The strong dollar

At the heart of the issue for Trump & company is the massive demand for U.S. assets which keeps the dollar too strong. Making American exports more expensive and imports cheaper.

The result? American manufacturing gets squeezed, trade deficits grow, and U.S. workers suffer.

Now Trump & company want to break that playbook. And maybe risk the Dollars reserve currency status?

Let me tell you what their thinking.

2) The “Mar-a-Lago-Accord”

In case your wondering whether I am making this all up.

Nope, I’m not making this up.

I wish I were 😂

Trump’s recently nominated Chair of the Council of Economic Advisers actually published a whole paper laying this out last year:

So what’s the big idea? It’s been dubbed the “Mar-a-Lago Accord,” and the playbook looks kinda like this:

a) Slap tariffs (or threaten to) on basically anyone exporting to the U.S. The logic? Boost revenue to shrink the deficit and protect American industry. Two birds, one tax

b) Weaken the dollar. Yeah, you read that right. The plan is to convince (or pressure) foreign governments to hold fewer dollars. And if they don’t wanna play ball? You guessed it: more tariffs.

c) Pay to Play: If a country messes with currency, blocks U.S. businesses, or doesn’t do its “fair share” on global stuff, then… surprise! More tariffs or consequences.

The f… crazy thing, it kinda looks like this strategy is already in motion.

What could possibly go wrong? Right 🤣 

In case you're still skeptical, I don’t blame you. But here is a little taste:

3) Now the problem is that nobody knows how far they are willing to go with this.

And that uncertainty is a problem for the markets.

One day it’s “Trump wants to buy Greenland”. Next, it’s tariffs on Canada.

Then we’re talking fentanyl crackdowns with Mexico. Then tariffs on the EU.

And now we’ve got April 2 — aka “Liberation Day.”

However that might play out. Maybe its a nothing burger, who knows?

But for now the economy and markets are just doing what they do when stuff starts getting and uncertain and crazy:

• GDP is being revised down:

• Corporate earnings are being revised down:

• Stocks are going down:

• Investors are kinda looking around and thinking… is the U.S. still the no-brainer it was two months ago?

• Investors are allocating a little more capital in other places (like Europe).

• And as a consequence international stocks are beating US stocks.

In summary:

And administration officials are well aware of what’s happening:

Nothing is written in stone. We’ll just have to wait and see how this plays out and how markets react.

4) Gold goes through $3,000/ounce 💰️ 💰️ 💰️ 

I’ve been keeping an eye on gold’s rally since last year, which is funny because, historically, I never cared much for gold. So why the sudden interest?

Take a look at the chart above again. Gold peaked in 2010, and for more than a decade, it was dead money.

Then, since 2023 it has gone parabolic 🚀. So something has changed.

Gold no longer moves opposite to interest rates (since higher yields make gold less attractive). That relationship seems to have broken down:

Now, the big question: Is this just gold partying all on its own? Or is it signaling something broader?

What happened the last time gold had a monster decade (2000-2010)? US stocks had a terrible one 📉, after the dotcom bubble popped 🫠

That’s why people are thinking long and hard about this one.

charts

Chinese stocks are enjoying their best start to a calendar year.

Ever. Not the best start in the past five or ten years… But best start as in as far as the data goes back which is more than twenty five years.

Where are we in the stock market cycle? 

And finally, some parting wisdom