The Keys to Understanding This Market
Editor's Note: The markets and our offices will be closed tomorrow for Good Friday. As a result, we're publishing This Week on Wall Street – as well as this week's Stansberry Investor Suite research – a day early. Next week, we'll be back to our normal schedule. We hope you enjoy the holiday!
Dear subscriber,
Things have calmed this week. The headlines have slowed. And the market's "fear gauge," the CBOE Volatility Index, is in retreat.
That gives us a minute to look around and see what may be next...
Because while the tariff drama whips markets back and forth, there's a bigger, broader story to watch.
In short, two massive themes will drive the market over the next few months. And "massive" is no exaggeration. I'm talking about macroeconomic shifts at the highest level.
First up is what corporate America does from here. I've talked about how the market has reacted to tariffs. But how companies choose to react is what really matters.
Will they raise prices? Move production? Go bankrupt? Build factories?
The steps companies take to address President Donald Trump's tariffs are likely to have longer-lasting effects that will rip through all parts of the economy. So you need to keep an eye on what they do next.
The second thing to watch is consumer sentiment... which, as of late, has turned abysmal. Currently, consumer sentiment is worse than it was during the great financial crisis...
Given that consumer spending drives the economy, that's worrying. Several economists have recently raised their forecasts for a recession. Goldman Sachs in particular puts the odds that the U.S. will enter a recession at 45%.
To make matters worse, capital is already flowing out of the U.S., as we discussed a couple weeks ago.
Capital flows determine valuation multiples. And recessions determine earnings. When you pair those together, the effects multiply.
If capital continues to flow out of U.S. assets, U.S. stocks will get a valuation similar to international stocks. And if corporate earnings decline as they do in a typical recession, that could mean an additional 40% decline in the S&P 500 Index from here.
This is when you stop paying attention to all the headline noise and start looking at what's actually happening...
We all want to know what effect tariffs will have. We want to know whether or not we should worry about a recession.
Well, if you listen close enough, the market will tell you.
We're about to get some extremely valuable information on what comes next. That's because it's earnings season – when every publicly traded U.S. company reports its latest quarterly results.
As you can see, the reports tend to cluster together, forming one big wave of results...
There's no official kick-off date, but many consider the start of this earnings season to be April 11, when banking giants Wells Fargo (WFC) and JPMorgan Chase (JPM) report their numbers.
(As a side note, two days prior to JPMorgan's release, CEO Jamie Dimon went on Fox News to talk about the bank's recent earnings and to share some concerns regarding Trump's tariff plans. It has been reported that Dimon's words are actually what encouraged Trump to enact his 90-day pause on tariffs, which was announced later the same day.)
Even though a majority of Trump's new tariff policies weren't announced until "Liberation Day" on April 2, Trump still made plenty of noise regarding his plans for U.S. trading partners last quarter. So we'll still get some valuable data and statements from executives that will help us understand what moves they're making.
Of course, I'll be watching the big-name stocks that always move markets. (And I'll provide some rapid-fire updates on social platform X, so follow @MattWeinschenk if you want to see the numbers roll in.)
Chip giant Nvidia (NVDA), for example, has been a great bellwether for tech spending lately. And retail behemoth Walmart (WMT) has a good pulse on the consumer.
But there are also some companies to watch that may not be on your radar... like C.H. Robinson Worldwide (CHRW) and A.P. Møller Maersk (AMKBY).
C.H. Robinson provides shipping-logistics services for all kinds of businesses worldwide. Last year, it managed around 37 million shipments.
At an investor event last month, CEO Dave Bozeman told investors that the company handles one-tenth of the shipments coming from Mexico into the U.S. It's a big player in Canada, too.
For many companies trying to navigate tariffs, C.H. Robinson will be their first call.
At the time of its earnings report, C.H. Robinson said that most businesses weren't making big moves to account for tariffs. As Chief Financial Officer Damon Lee explained, "Many customers are trying to see if this is transitory and [if] the tariffs going to stick or they [are] just leverage to drive some other policy for the administration."
It's hard to imagine those businesses are still standing pat after Liberation Day... But let's let C.H. Robinson's results on April 30 tell us what they're actually up to. I'll be watching for comments on just what strategies C.H. Robinson's customers are pursuing. The company also shares quarterly data on truckload pricing... which gives insights into global demand and is therefore a good indicator for economic health.
Maersk is also in the transportation business, though it focuses more on global ocean shipping rather than North American ground transport like C.H. Robinson. That gives it more insights into places overseas, like China and Europe.
In its last earnings call, CEO Vincent Clerc completely whiffed on tariff expectations.
Clerc said the U.S. likely wouldn't institute large tariffs because the American people were tired of inflation, and that tariffs wouldn't disrupt international trade...
I think there is some expectations that as long as the tariffs are measured, and as long as the administration stays true to the fact that they are going to do something on tariff, but with an eye on inflation, that things will be okay and will not have a huge impact on volume.
Of course, if things turn completely and somebody slaps 60% tariffs overnight, then this will have an impact. But that is not what seems to be the dominant scenario so far.
Now, I'm not picking on Clerc. His view made sense at the time. And when he spoke, he included plenty of qualifiers to recognize it was an unpredictable situation.
But it will be interesting to see what adjustments the company now expects among its customers.
Maersk will also report important details on shipping rates. And like C.H. Robinson's trucking data, they'll help us gauge what's going on in the global economy.
Plus, Maersk is headquartered in Denmark – a country furious over Trump's comments about seizing Greenland. And further perspective on what the tariffs have done to international sentiment will carry extra value. Maersk reports on May 8.
Now, we also want to keep an eye on more consumer-facing companies...
Consumers have been on an absolute tear ever since the pandemic, when they were flush with cash from stimulus checks.
As you can see, personal consumption expenditures (which measure how much people are spending on goods and services) have surged to a record high of more than $20 trillion. Importantly, they're growing at a rate much faster than the historical average...
Investors have worried that, at some point, the consumer will run out of spending steam. And now, with sentiment turning sour, we want to see if we're nearing that point...
The first company to watch here is payments giant Visa (V), which reports on April 29. I don't care so much about Visa's own earnings, but rather about the transaction data it shares.
Just about everyone buys everything with a swipe of their credit card these days. And most of those transactions go through Visa or, another good company to watch, Mastercard (MA).
Visa's data can give you incredible insights into the economy and the consumer. In particular, you want to watch the number of transactions and the dollar amount of spending (what's called "payments volume").
Visa has seen incredible growth in these numbers in recent years. Over the past decade, it has averaged 13% transaction growth and 10% payments-volume growth, per year. If those numbers decline, it will signal a shift in consumer behavior.
Visa also reports the growth in cross-border purchases. These have averaged a whopping 27% per year. Its latest results will show us if consumers are buying less foreign goods (even before the bulk of tariffs were announced).
Airlines are also good consumer-facing companies to watch...
That's because when consumers are forced to tighten their belts, leisure travel gets cut.
Earlier this month, on April 9, Delta Air Lines (DAL) reported that earnings were roughly flat. More importantly, it surprised markets by dropping its full-year earnings guidance.
The company said that uncertainty around global trade made management uncomfortable projecting what the coming year would look like. It also said it was "acting as if we're going into a recession" and that everyone was "going into a defensive posture."
On the other hand, United Airlines (UAL) reaffirmed its guidance. However, it also said the economy was "impossible to predict" this year.
Next week, on April 24, we'll hear from Southwest Airlines (LUV). Its results will let us know what's happening with domestic travel, as most of Southwest's flights are operated within the U.S.
As of the end of 2024, Southwest still reported strong demand from fliers. But last month, Southwest started to voice lower expectations...
The key metric for an airline is revenue per available seat mile ("RASM"). Southwest started 2025 expecting 5% to 7% RASM growth, but in an investor presentation on March 11, it lowered that outlook to 2% to 4%.
We'll want to watch for Southwest's read on domestic consumers. But so far, U.S. airline stocks are painting a pretty grim picture...
We're in a hell of a market right now. And every piece of data has become extremely valuable.
Investors often want to know what the future holds so they can prepare and invest accordingly. But sometimes, the job is just to understand the present.
While you should be concerned about a prolonged bear market... it's not yet a foregone conclusion. So there's no need for all-out panic just yet.
Again, one of the most important things you can do today is ignore the noise and focus on what's right in front of you... the cold hard data. It'll tell you what you need to know to stay ahead of the game.
What Our Experts Are Reading and Sharing...
So far this earnings season, the big banks have done very well. And it's easy to see why... Volatile markets lead investors to aggressively reorient their portfolios. Trading volume goes up. And the trading desks of banks like Goldman Sachs (GS), JPMorgan Chase, Bank of America (BAC), and Citigroup (C) all profit. (It's a phenomenon we've covered time and again in Stansberry's Investment Advisory. We call companies like these the "Gatekeepers of the Financial Markets.")
Companies that sell luxury goods have started prepping for tariffs... but a recession may get them first. Luxury giant LVMH Moët Hennessy Louis Vuitton (LVMUY) posted sales declines in fashion and leather goods, an announcement that dragged the luxury sector down. The Financial Times points to "subdued demand" from Chinese customers.
Our own Whitney Tilson recently consolidated the negative news flow in his daily e-letter. However, he also said that we're at (or near) peak uncertainty and fear. He recommends staying the course and makes a great case for informed optimism.
New Research in The Stansberry Investor Suite...
Stocks have sailed back and forth since the start of the year – especially so since Liberation Day.
The tech sector has been hit particularly hard on rising costs and the threat of retaliatory tariffs.
But our tech experts at Stansberry Innovations Report see this as the perfect time to make a move. Because tech companies are going on sale... and one of the biggest – a "Magnificent Seven" leader – is finally in buy range.
It's impossible to tease this stock without giving it away. If I describe even a single product or feature of this company, you'll know exactly which stock I'm talking about.
(I'll give you one hint, though: This company is associated with what's become a common Internet verb... a great sign for a powerful brand.)
This is the kind of company that isn't influenced by political theater. Its products and services are essential worldwide. (In fact, Trump has already proven that he wants to protect companies like this in the coming months and years.)
As the Innovations Report team explains in this month's issue, "[This company's] digital infrastructure is not just the backbone of the Internet... It's a bet on the future of computing itself."
While we don't know what the next few weeks or months will bring to the market, we do know that buying the best businesses during panics often leads to the greatest returns. So don't miss your chance to buy this tech titan while it's cheap... According to the math, this stock could be nearly 50% undervalued.
Stansberry Investor Suite subscribers can read the entire report here.
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Until next week,
Matt Weinschenk
Director of Research
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