A Whiskey Rebellion
Caught in the tariff-war crossfire... The S&P 500 slips into a correction... The White House message... $3,000 gold is near... Good war news isn't saving the markets... Inflation data wasn't 'good enough'... Signals to watch...
Please, not the wine and the whiskey...
The latest products to get caught up in the tariff-war crossfire: booze. And the idea helped sink the S&P 500 Index into formal "correction" territory, now down 10% from its all-time high less than a month ago.
Here's global news service Reuters today, reporting on a morning social media post from President Donald Trump...
Trump threatens tariffs on European wine and spirits in escalating trade war
U.S. President Donald Trump on Thursday threatened to slap a 200% tariff on wine, cognac and other alcohol imports from Europe, opening a new front in a global trade war that has roiled financial markets and raised recession fears.
This comes after the European Union yesterday proposed a 50% tariff on American whiskey to begin in April.
This isn't quite as dramatic as the original Whiskey Rebellion – when the newly formed U.S. government imposed an excise tax on whiskey to pay off Revolutionary War debts in the late 1700s, leading to an uprising in Western Pennsylvania – but it's in the same ballpark.
It's hard to see tariffs on booze, or anything, not directly impacting American businesses (and consumers with higher prices), certainly in the short term. We saw it with alcohol during the trade war during Trump's first term...
In 2018, the EU imposed retaliatory tariffs that cut exports of U.S.-made whiskey by 20%, according to the Distilled Spirits Council. Chris Swonger, the organization's CEO, today called for a return to "zero-for-zero tariffs, which will create U.S. jobs and increase manufacturing and exports for the American hospitality sector. We want toasts not tariffs."
EU and U.S. trade reps are scheduled for a direct talk tomorrow, so we'll see what develops on this front of the tariff war. I (Corey McLaughlin) suspect some concessions will be on the negotiating table, much like with the auto industry and with Canada and Mexico generally.
Yet today, Trump said, "I'm not going to bend at all," remaining in a negotiating posture.
In any case, between the new tariffs and the threat of further economic escalations, it was another volatile day for the markets. Each of the major U.S. indexes was down by more than 1% today.
If any more investors needed a reason to "sell first and ask questions later," they found it.
Meanwhile, the treasury secretary went on TV to try to soothe the market...
As the markets traded lower again this morning, Secretary of the Treasury Scott Bessent – a longtime hedge-fund trader and a key member of Trump's cabinet – said during an interview on CNBC...
What we're trying to do is create economic certainty.
Bessent aimed to reassure business leaders about the administration's agenda. He promised a tax-cut bill by this summer and continued deregulation.
These are significant.
Responding to concerns about the Department of Government Efficiency ("DOGE"), he said if any company implemented the same policies, its stock would likely go up because it would be on a better "sustainable course."
Of the tariffs on alcohol, he said, "One or two items with one trading bloc, I'm not sure why that's a big deal for the markets."
These points are reasonable.
But what about the two-month-long trend of lower long-term bond yields (signaling expectations for lower growth, as we've explained)? Bessent avoided a direct answer...
The secretary said that maybe it was because of lower inflation... but also claimed that the Federal Reserve Bank of Atlanta's GDPNow projection (of negative 2.4% for the first quarter) would actually be positive... but only if you don't include gold imports. "Kind of an anomaly," Bessent said.
Well, that's interesting. Maybe it was all going to Fort Knox (still yet to be visited by White House officials, so far as we know). In any case, the revelation didn't hurt gold's price, which hit a new all-time high today close to $2,980 per ounce – within striking distance of a nice round $3,000.
Gold is called a "chaos hedge," and in these uncertain times, it's doing exactly what it should for a well-diversified portfolio.
In other, brighter news...
Russian President Vladimir Putin indicated today he's open to ending the war in Ukraine "through peaceful means." That includes the idea of a ceasefire (which the Ukrainians agreed to yesterday, as we reported).
For an end to happen, Putin said he wants to talk directly with Trump about eliminating the "root causes of this crisis."
Notably, that includes decades of history of disputes regarding NATO and other issues, which Russian Foreign Minister Sergey Lavrov spoke about in an in-depth video interview with a group from the U.S. just yesterday. (It's worth a watch on its own.)
Putin also said today that if the U.S. and Russia reached some kind agreement on energy, Russia could provide a gas pipeline for Europe. Given the right conditions, a thawing of tensions among all involved seems doable.
As we've said before, though, the devil is in the details.
Interestingly, the market didn't even appear to react to this midday news, however. This could be a tell... about something else that was driving market action today (other than more tariff fear).
That's inflation – again.
Today's inflation read appeared good...
Yesterday, we dove into the new consumer price index ("CPI") report for February. In short, inflation was cooler than expected, and that was a welcome sign for markets after January's jump. Today, we got more welcome news on the inflation front...
The Bureau of Labor Statistics followed up yesterday's CPI report with the release of February's producer price index ("PPI") this morning.
In February, the PPI was flat from January but was up 3.2% from February 2024. "Core" PPI, which strips out energy and food, declined 0.1% from January and was up 3.4% year over year in February.
You can look at PPI as a leading indicator for consumer inflation. It measures the prices that producers pay for components. So if businesses are paying more to make their products, we can expect them to pass off the higher costs to customers.
That wasn't the case in February. And that could mean producers won't have to continue raising prices at the same rate to maintain their margins. For anyone concerned about the immediate impact of tariffs or the threat of them, this should be good news.
But it might be 'bad news.' That's because the data wasn't good enough...
If you plug the CPI and PPI data into the formula used for the Fed's preferred inflation gauge – the core personal consumption expenditures ("PCE") index – the number suggests a 2.7% year-over-year inflation reading for February, according to analysts at Bank of America and a few other Wall Street firms.
That's slightly higher than the 2.6% in January, which means the pace of disinflation has slowed, or at the very least stalled. So the Fed will likely not be inclined to lower interest rates anytime soon, because inflation is still running above its 2% target and unemployment remains relatively low.
We suspect that's why the markets didn't spike higher on a softer-than-expected PPI reading. The major indexes initially climbed off their lows in premarket trading when the report came out, but it didn't last.
All in all, we've seen both CPI and PPI bounce around from month to month, and inflation is still above the Fed's 2% goal.
So there was nothing in either report this week that would force the Fed to act. Plus, the uncertainty from tariffs could still push inflation numbers higher in the coming months, though key prices like that of energy keep falling.
In the meantime, we expect more headline volatility translating into price swings in the markets.
We told you yesterday a rate cut next week would shock the market. Over the past two days, federal-funds future traders have also reduced their expectations for a rate cut at the central bank's next meeting in May... from 50/50 odds of a cut to just a 33% chance.
The Fed's June meeting is now the betting favorite for the next cut from the central bank.
Putting it all together...
The S&P 500 hit a new six-month low today... and is now 10% lower from its all-time high on February 19. It has entered a correction in less than a month. Headlines continue to scare folks... and businesses are weighing the thought of suddenly higher costs due to tariffs.
It might feel painful, but our glass is half full. If you're really interested in investing for the long term, this might be a great time to pick up shares of high-quality businesses trading at more reasonable valuations than they had been.
Plus, how this week has played out isn't that surprising when you take a step back. As we wrote on Monday...
If there is going to be a near-term broad market "bottom" soon, it might need a little more time.
We pointed to our Stansberry Research Complacency Indicator, which has been extremely reliable in predicting 10% corrections over the past 35 years. It flashed one year ago, suggesting a correction within the next 12 months, and that's exactly what we have now.
This indicator has now predicted 11 of the past 13 corrections or greater, with only one "false" signal that preceded a market drop of 8.9%. Now, we're not calling a bottom quite yet, but we are watching for signs of a potential turnaround (or for the alternative).
Stansberry Research senior analyst Brett Eversole just wrote to True Wealth Systems subscribers yesterday that the level of extreme market fear among "mom and pop" investors suggests a market rebound over the next three, six, and 12 months.
DailyWealth Trader editor Chris Igou noted to subscribers yesterday that regional banks, for example, have hit their most "oversold" level since the regional-banking crisis of early 2023 and "we likely aren't far from this pullback being over."
We've also been listening to our in-house technical analysis expert, Ten Stock Trader editor Greg Diamond. He has been noting that the market could be near the end... of what he says is a very long correction within a longer uptrend. He talked about this in a free video here.
And I can tell you Greg is preparing to put on some new trades. During Trump's first term, Greg found 17 different ways to double your money in as little as a day. Now, with volatility hitting investors hard, he sees more opportunity.
Ten Stock Trader subscribers and Stansberry Alliance members can find his latest updates here. And if you don't already have access to Greg's work, click here to learn more and get started today.
New 52-week highs (as of 3/12/25): Agnico Eagle Mines (AEM), Alamos Gold (AGI), Franco-Nevada (FNV), and Wheaton Precious Metals (WPM).
In today's mailbag, feedback on mail from earlier this week... Do you have a comment or question? As always, e-mail us at feedback@stansberryresearch.com.
"In response to one of your reader comments [that said] 'The current approach is very disruptive for the business climate and world.'
"I have a hard time imagining what could improve, and indeed, change direction of many of the things our government bureaucracy is doing that wouldn't be 'very disruptive'. Disruption is what we need! And look how well it's worked already for Argentina, and I'm sure will continue to work there." – Subscriber John W.
All the best,
Corey McLaughlin and Nick Koziol
Baltimore, Maryland
March 13, 2025