Another Sign the 'Worst' Is Over

Trump goes to Saudi Arabia... So do Jensen Huang, Elon Musk, and Larry Fink... The 'Trump put' is alive and well... 'Normal' inflation... Market momentum has flipped... An investment idea from a San Francisco wine bar... 

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'Amazing what a rising market will do'...

President Donald Trump delivered those words today to a captive audience at the Saudi-U.S. investment forum...

A rising market cures all, he was saying, at least when it comes to American business executives and their concerns about his unpredictable tariff and trade policy. Trump said of those CEOs today...

About a month ago, they weren't that happy when they saw me. And now they're saying, "Sir, you're doing a great job, thank you very much." Amazing what a rising market will do.

Then he added...

Oh, it's going to get a lot higher... I told people five weeks ago, this is a great time to buy... People should have listened.

The market has been looking for a "Trump put" – the idea that the White House will do what it can to ease market jitters or panic. They found it in this ad-lib... part of a roughly 50-minute speech in front of Saudi and U.S. business stakeholders (a crowd that included Elon Musk, Nvidia CEO Jensen Huang, and BlackRock CEO Larry Fink, among others).

Huang's presence was notable to me (Corey McLaughlin). It made more sense as Nvidia (NVDA) announced during the event that it will send 18,000 artificial-intelligence computer chips to a Saudi Arabia state-sponsored AI company, Humain, in a partnership with Saudi Arabia's sovereign wealth fund. Nvidia shares gained more than 5% today.

It wasn't the only economic news to come out of the event...

Saudi Arabia has also committed to invest $600 billion in the U.S., including spending nearly $142 billion on defense for "state-of-the-art warfighting equipment and services from over a dozen U.S. defense firms," according to the White House.

And in another news-making move, Trump said near the end of the speech that the U.S. was removing all economic sanctions on Syria. That's an interest of Saudi Arabia to promote stability in the region. "Oh, what I do for the crown prince," Trump said, referring to Saudi leader Mohammed bin Salman.

All that said, Trump can't guarantee uninterrupted smooth sailing in the economy and markets from here. But he's undeniably playing a leading role in market behavior right now, in addition to geopolitics.

(In addition to the four-day Middle East tour, Trump is trying to broker a Ukraine-Russia peace meeting on Thursday. We also wrote recently that a cozier Saudi-U.S. relationship was behind lower global oil prices lately.)

Back home, the "worst-case scenario" of immediate impacts from high double-digit and triple-digit tariff rates comes off the table, as the White House announced "de-escalation" with China yesterday and signals more trade deals to come. The market has responded with approval.

The S&P 500 Index is now up 18% since Trump's '90-day tariff pause' began...

On April 9, Trump said he'd suspend the "Liberation Day" tariff rates he announced seven days earlier.

That softening stance juiced the market mood. Plus, Wall Street's favorite economic data hasn't yet shown damage from tariffs (besides a first-quarter GDP decline that was distorted by a record amount of imports from businesses frontrunning expected tariffs).

Today, for example, the latest "official" inflation data came out from Uncle Sam. It showed a more normal 0.2% month-over-month growth in April and a 2.3% year-over-year gain in the consumer price index ("CPI"), the lowest headline number since February 2021.

Those were more "normal" inflation numbers. And importantly, they didn't show notable immediate price increases due to tariffs, which would have shown up in this April data.

Stocks moved higher and the bond market didn't move much, as Ten Stock Trader editor Greg Diamond wrote this morning...

Consumer Price Index ("CPI") numbers came in lower than expected. And interest rates are mixed, with the front end lower and the back end slightly higher.

More inflation numbers release tomorrow and into Friday, so we'll monitor how the bond market continues to react. I want you to keep something in mind meanwhile... With the rapidly changing tariff situation, the delayed data from these numbers (whether good or bad) may be discounted by the market. It'll all depend on if there are big swings as trade deals are hashed out. 

The tech-heavy Nasdaq Composite Index finished up 1.6% today and is now at its highest level since late February.

The benchmark S&P 500 gained 0.7% – it's now about flat year-to-date – and the small-cap Russell 2000 Index was up 0.6%. The Dow Jones Industrial Average was down 0.6%, primarily due to a 17% drop in UnitedHealth (UNH) shares as the company's CEO resigned and it didn't give forward guidance.

Overall, markets have calmed lately, with the CBOE Volatility Index ("VIX") steady near 18.

In other news, oil prices gained more than 2% today. The 10-year Treasury yield gained some to near 4.5%.

Mostly, momentum has flipped...

And this points to more gains for stocks to come in the year ahead. As Stansberry Research senior analyst Brett Eversole wrote in the DailyWealth newsletter today...

Tariffs have shocked the markets in recent weeks. But stocks were on shaky ground even before President Donald Trump's "Liberation Day" announcement...

The S&P 500 Index peaked on February 19. And by one measure, stocks began showing downward momentum just two days later.

That downward pressure lasted for an additional 42 trading days... the longest streak since 2002.

This is a rare situation. But now, the market has broken its streak. And according to history, that change in trend could lead to a 16% rally over the next year.

One way to track the market's "overall trend," Brett explained, is with the relative strength index ("RSI") momentum indicator.

This metric essentially reflects the average gain of a stock or index over a certain period of time (14 days is common), divided by the average loss during that same period. The higher the RSI, the stronger the "relative strength" and the greater the "momentum."

The RSI can help you identify possible extremes in momentum around a stock that can be used for signals to buy, sell, or hold a trade or investment, and also to show market trends in general. As Brett continued...

Usually, we use the RSI to tell us if stocks are "overbought" (an RSI above 70) or "oversold" (an RSI below 30). Those are signs that the market has moved too far, too fast in either direction.

But you can also figure out the overall trend based on this indicator. An RSI below 50 signals a downtrend.

The S&P 500's RSI fell below 50 on February 21... And it stayed below that level for a total of 43 straight days. Take a look...

The RSI tends to swing up and down, even in bull or bear markets. But this multiday streak was continually below 50. And that's darn rare.

But as you can see, weak momentum has turned into strength. As Brett points out, this indicates an important shift that could lead to more gains.

As we wrote yesterday, this isn't to say America's tariff swings don't present the market with risks that we should consider.

Even with the lowering of new tariffs on China from 145% to 30%... other proposed "reciprocal" rates and a 10% blanket import tax bring the average "effective tariff rate" on U.S. imports to near 18%, according to the Yale Budget Lab. That's America's highest rate since 1934, and those higher costs for U.S. companies (which pay tariffs) will have to be accounted for somehow.

To think the highest tariff rate in 91 years (back when the U.S. dollar was just coming off the gold standard) – or even something close to it – won't impact the economy in a substantial way today seems misguided.

But it is amazing what a rising market can do to obscure concerns that were said to be rattling the market not long ago.

Today's market is in rare company...

Brett went back and looked at every time since 1950 that the market showed such a dismal streak of bad days as we'd seen recently. He found only nine other instances – and a convincing conclusion.

On average, the U.S. benchmark outperformed its average over the next three, six, and 12 months and had limited downside risk. As Brett wrote...

The negative momentum can't last forever... So stocks tend to outperform going forward. Take a look...

The S&P 500 is an incredible long-term compounder. It has led to 8% annual gains over the past 75 years. But you can do much better if you buy after setups like the one we just saw.

Similar instances led to 4.7% gains in three months, 6.6% gains in six months, and 15.5% gains over a year. Those are impressive overall returns. And they handily beat a typical buy-and-hold strategy.

What's more, stocks were higher a year later in eight out of nine instances. And the only losing trade was a decline of less than 1%.

In Brett's view, this setup suggests that the "worst of the bust is behind us. And with stocks rallying, it's wise to think about buying." Be sure to check out his latest stock recommendations in True Wealth and True Wealth Systems, and follow Brett for free in DailyWealth.

Speaking of buying...

It's not every day we come across a kind of stock recommendation that we consider an absolute must-listen. But our friend Marc Chaikin, founder of our corporate affiliate Chaikin Analytics, recently shared one that qualifies... And I wanted to make sure you get a chance to hear it before the opportunity passes tonight.

Marc is a 59-year-veteran investor who has worked with some of the biggest names on Wall Street. As he says about his new recommendation, "Sometimes the best investing ideas hit you in the strangest places. For me, it was in a wine bar in San Francisco."

Get the whole story from Marc here... It's about what he calls an investment in the future... and a company whose platform could radically transform a $1 trillion market. Though this company has partnered with the biggest name in AI, few people know this stock today.

That means opportunity, Marc says, but not for long. Shares could soar by 90% by the end of this month, he says. Learn more from Marc in this brief message. He'll tell you how you can access the ticker symbol of this company, but don't delay. The video goes offline at midnight Eastern time tonight.

New 52-week highs (as of 5/12/25): Dimensional International Small Cap Value Fund (DISV), SPDR Euro STOXX 50 Fund (FEZ), Franklin FTSE Japan Fund (FLJP), and iShares U.S. Aerospace & Defense Fund (ITA).

In today's mailbag, feedback on yesterday's edition about the "'Liberation Day' unwind" and a rallying stock market... Do you have a comment or question? As always, e-mail us at feedback@stansberryresearch.com.

"While I was delighted to see the market do so well today, this strikes me as an overreaction to the upside. I think the two most important paragraphs in this Digest were these:

And while the "worst" tariff impacts may be delayed and we expect a few promising-sounding trade "deals" to come from the White House soon – probably next week after Trump's tour of the Middle East – trade-related risks remain.

Global supply chains have already been unsettled to some degree and prices may rise because of it... small businesses are stressed... the labor market is showing some weakness... and I wouldn't blame any person or business for not believing in any certainty from the federal government.

"I live in Southern California and am very much aware of what is currently happening in the Port of Los Angeles. Rest assured it will not be good for the economy or employment in this area, and I suspect other ports will be similarly impacted... Rocky times lie ahead." – Subscriber Sherwin R.

"Corey... Good summary. And perhaps an excellent subtle 'warning', in spite of the fact that immediate negative volatility is stabilized. Me? I've always thought the goal was 10% Tariffs, irrespective of negotiations. And, I suspect we have not really dialed in the consequences of the 'smallish' 10%.

"NOTE: A common Trump strategy is to scare one with greater consequence, thinking an opponent will accept a lesser consequence as more acceptable. Looks like it is playing out that way... Nice job, thanks." – Stansberry Alliance member Bill B.

All the best,

Corey McLaughlin
Baltimore, Maryland
May 13, 2025