A Huge Reversal in Policy (and the Market)
Dear subscriber,
The S&P 500 Index unexpectedly whipsawed 7% higher in less than an hour Monday morning...
It was a nice change of pace from last week's bloodbath – no matter how short-lived (and potentially misinformed) the rally was.
A popular but anonymous X account that's known for quickly sharing headline news posted that President Donald Trump was considering a 90-day pause on tariffs.
The market surged higher on the information... But the White House quickly dismissed the report as "fake news." And the market reversed course.
On Tuesday, it was a similar story...
In the morning, the market rallied after Treasury Secretary Scott Bessent reported on constructive talks with Japan. The news gave investors hope that the Trump administration was willing to negotiate on tariffs.
But by midday, the White House confirmed that it would raise its overall tariff rate on China to 104%... and that it would take effect at midnight.
The market cratered, losing 1.6% on the day after being up more than 4%.
Then, on Wednesday, Trump did institute a 90-day pause on tariffs for dozens of U.S. trading partners. And the market ripped higher on what was now "real news."
I'm not surprised.
The early action this week made it incredibly clear: Tariffs make the market fall. Tariff relief makes the market rise.
Trump obviously couldn't stand the pain tariffs were reaping any longer.
I have to say... while we've never claimed to understand Trump's mind or his master plan, we've followed this action well.
On March 14, I told readers, "I think there is a Trump put... I'm just not sure how far the market has to fall before we see it."
The following week, I pointed out how tariffs risked driving the economy into a terrifying period of stagflation.
And last week, I continued by saying that Trump's tariffs may lead to the end of America's financial empire.
The story here was simple... Tariffs destroy wealth and prosperity.
I know my economics. And I'll admit some lessons of the dismal science are open to debate.
But there's one thing that economics has proved to be true... Free markets are the key to unlocking the greatest wealth for all.
Allowing individuals to pursue trade and profits leads to innovation and efficiencies that no other economic system can provide.
Trade barriers, taxes, undue regulations, occupational licensing, and industrial policy all get in the way of the human impulse to build, trade, grow, and share.
Trump's tariff policy was bound to run into that truth. But he didn't do himself any favors by implementing it in a self-destructive manner.
The way the tariffs took hold – with extreme speed and confusing logic – risked grinding global growth to a halt.
Along the way, the White House has claimed both that it designed the tariffs to bring countries to the table to make deals... and that "this is not a negotiating tactic."
According to the Wall Street Journal, business leaders have grown frustrated with Commerce Secretary Howard Lutnick, in part because he keeps taking "contradictory positions on key issues."
Now, it looks like Trump has favored Bessent's more mainstream view, at the expense of his hardline advisers like Peter Navarro and Lutnick.
Putting tariffs in place so quickly was counterproductive.
Trump's entire goal was to boost American manufacturing. But as businesses struggled with tariffs on supplies and imports, it had the opposite effect. If you want to build a factory, you need to import the machinery for it... or wait years for it to be built here.
So the tariffs made manufacturing businesses less optimistic – not more.
The Institute for Supply Management's ("ISM") Manufacturing Purchasing Managers' Index for March showed an expected contraction in manufacturing activity, indicated by a reading below 50...
Some manufacturing executives reported, "Customers are pulling in orders due to anxiety about continued tariffs and pricing pressures," specifically referring to computers and electronics.
When talking about machinery, they said, "Business condition is deteriorating at a fast pace. Tariffs and economic uncertainty are making the current business environment challenging."
Keep in mind, that survey was from March... which feels like a lifetime ago in the tariff saga.
What's not surprising: Trump threw in the towel right at the point of maximum pain for investors.
There's a playbook for working through market crashes like this...
By watching market dynamics, you can find patterns that show you when the market may be bottoming.
When you have a falling market, you want to find out when maximum pessimism hits. That's because stocks tend to turn back up after a cleansing panic sweeps through the market, exhausting all the sellers.
We were hitting those panic points – right when Trump decided he (and the market) couldn't take it anymore.
Just look at how many stocks had been hitting new lows...
In the chart below, you can see that the number of stocks at new 52-week lows in the New York Stock Exchange ("NYSE") outpaced the number of stocks at new highs by more than 600 on April 4.
Over the past 30 years, that's second only to the dot-com crash and closely followed by the COVID-19 pandemic – a clear sign of maximum pessimism...
You can also see this by looking at the CBOE Volatility Index ("VIX") – which is often referred to as the "fear index."
The VIX reflects the cost of insuring against stock losses (i.e., the prices of options) over the next 30 days.
When the VIX is low, it means investors don't expect much volatility (so they aren't paying for the protection that options afford). When the VIX is high, investors are fearful of volatility (and options become more expensive).
Specifically, when the VIX surges above 40 or so, it's a good indicator that the bottom is in...
These are clear signs that the market was at a point of peak pain. Trump felt it, too.
Now, we're all wondering what the playbook is for the next 90 days, with tariffs on pause.
When that clock runs out, does Trump revive tariffs at the level he threatened, making this a true "pause"? Or does he come in softer and slower with tariff rates, having taken a lesson from the market?
I'll give you some valuable indicators to watch for clues as to what comes next...
First, you can get a "pure" reading on Trump's tariff odds by looking at betting odds.
This is a decent, minute-by-minute way to distill the news into a number. Last year, betting site Polymarket got huge publicity when bettors on the platform correctly called the U.S. presidential election before anyone else.
Currently, you can bet on whether or not Trump will impose large tariffs in his first six months. And so far, Polymarket has tracked Trump's mood fairly well...
Second, you can look at the stocks of automakers.
They were clobbered by the tariff talk, as automakers rely heavily on imports and exports.
If there's even a whisper of a rumor about tariff relief echoing through the halls of Washington, D.C. or Wall Street, you'll see it in auto shares first.
I'm going to monitor Ford Motor (F), Volkswagen (VWAGY), and Toyota Motor (TM) to keep track of automakers in the U.S., Europe, and Asia, respectively...
Lastly, there's the U.S. dollar.
Currency markets are some of the most informed and most liquid markets in the world.
The U.S. instituting tariffs threatens not only our economy, but also the strength and stability of the U.S. dollar. If the dollar does well, it likely means the market expects Trump to come in softer with tariffs, and vice versa.
So the dollar is a good barometer for two things... what tariffs will look like after the 90-day pause, and whether recent events have permanently damaged America's position as a magnet for capital.
You can use either the U.S. Dollar Index ("DXY") or the Federal Reserve's Trade-Weighted U.S. Dollar Index to track the dollar's move...
This is a tough market to navigate. There's no doubt about that. "Buying the dip" worked (this week)... but only because Trump backed down.
If he keeps plowing ahead on tariffs, it's hard to find cause for long-term optimism.
It's not our favorite climate for investing, but this is still a "watch the headlines" sort of market until proven otherwise.
What Our Experts Are Reading and Sharing...
At Stansberry Research, our job is to help our readers navigate financial markets, no matter how difficult they may be. As I've noted above, today's market is a tough one. In Tuesday's Stansberry Digest, I outlined what investors can do to protect their investments in such a volatile time. The key is owning businesses at reasonable valuations, diversifying across both "boring" businesses and ones set for growth, and always following your stops.
Ben Hunt at Epsilon Theory outlines a worrying case for what tariffs have done to the global order. Hunt has a unique perspective as a former political science professor and hedge-fund analyst. He worries that switching from an economic system of cooperation to one where we antagonize our trading partners is a bell that can't be unrung.
Outside of all the tariff drama, AI progress continues. Back in 2021, before ChatGPT was even released, researcher Daniel Kokotajlo published a blog post predicting how AI would look in 2026... And he got a surprising number of things right. Now, Kokotajlo – along with an expanded team – has a new outlook on AI progress called "AI 2027." In the report, the team predicts rapid progress, including AI technology that can efficiently develop other new AI technology... leading to a sort of "singularity" moment. They also walk through major implications for national security.
New Research in The Stansberry Investor Suite...
Our own Mike DiBiase has a cheat code for the high-tariff landscape.
As with any shift in the global market or economic order, there will be winners and losers.
The prescription for finding the right businesses to own in this environment is fairly simple. As Mike explains it in today's Stansberry Investor Suite research...
The important thing to understand about this dramatic shift in global trade is that tariffs won't affect all businesses the same...
You want to avoid businesses that will struggle in a world of higher tariffs and a possible global trade war.
Specifically, you should avoid companies that 1) import a lot of high-tariff goods into the U.S. and 2) rely heavily on exports, as many countries are likely to impose retaliatory tariffs of their own.
That means you need to look for companies that source, make, and sell their products entirely in the U.S. That's a tough one. There aren't many companies that meet this criteria.
The next option, which you'll likely have better luck with, is to find companies that manufacture and sell most of their products outside of the U.S.
Mike continues by pairing those insights with a careful review of some of the best businesses in the world – those in our Global Elite Monitor – to find specific opportunities for investors today.
In particular, he looks at two stocks that have proved to be not only recession-resistant... but also offer protection from the tariff tantrum rocking the market.
As Mike points out, "Both companies have survived World War I, World War II, and even Prohibition in the U.S." (That last fact is a clue to the industry he's talking about.)
Today, both companies are true global giants – the largest in their industry. And the U.S. makes up just a small portion of their sales. Even better, they currently trade at great valuations.
Stansberry Investor Suite subscribers can read the entire report here.
If you don't already subscribe to The Stansberry Investor Suite – and want to learn more about our special package of research – click here.
Until next week,
Matt Weinschenk
Director of Research
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