The Tariff Plot Twist

Trump says the magic word... From panic to 'less bad'... What else they're saying in Washington... The latest with oil... Signs that peak pain is behind us?... What to watch this week...

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Everything is 'flexible'...

The tariff war continues to dominate headlines...

Late Friday, Wall Street cheered after U.S. Customs and Border Protection said some items like computers, tablets, Apple watches, and semiconductor equipment were exempted from President Donald Trump's 145% tariffs on Chinese products and the blanket 10% tariff on all U.S. imports.

But by Sunday, Commerce Secretary Howard Lutnick and White House trade adviser Peter Navarro – the architects behind the April 2 "Liberation Day" – tried to dash the sentiment... by explaining that those exemptions are temporary, if anything.

On Truth Social, Trump posted that, "NOBODY is getting 'off the hook'"... and that the specific products named by U.S. Customs still had a 20% "fentanyl tariff" over China's international drug-trade role.

Then, things went back toward "good" again...

At about 2 a.m. this morning, Trump told reporters on Air Force One that another formal tariff announcement on semiconductors will be coming some time "over the next week," much like what we saw with automobiles, steel, and aluminum.

But he said he was open to having "flexibility" with certain companies on certain items. Trump followed up today with comments that he's looking to "help some of the car companies."

This looks like "less bad" news for companies with heavy footprints in foreign markets, like say, Apple (AAPL) in China. Asked specifically about possible exemptions for Apple phones and other smartphones, Trump said in the Oval Office today...

I'm a very flexible person. I don't change my mind, but I'm flexible…

There will be maybe things coming up. I speak to [Apple CEO] Tim Cook… I don't want to hurt anybody, but the end result is we're going to get to the position of greatness for our country.

Shares of Apple are up roughly 18% since last Tuesday and were more than 2% higher today. That is significant for the company and the market-cap-weighted headline indexes, given Apple's heavy weight in them.

The major U.S. stock indexes finished up across the board today following all the news. The benchmark S&P 500 Index, Dow Jones Industrial Average, and Russell 2000 Index were each up about 1%. The tech-heavy Nasdaq Composite Index was 0.6% higher, and roughly 430 of the S&P 500 stocks were up. Longer-term bond yields were lower.

These days, a lot can change in a week...

Last Monday, after an intense multiday sell-off in stocks, panic was everywhere. And folks were logging into their retirement accounts at unusually high levels. One 401(k) investment activity barometer showed its highest trading activity since March 2020.

Rob Austin of Alight Solutions, which runs a 401(k) index that tracks more than 2 million investors who have roughly $200 billion in collective assets, said people were moving money out of large-cap stocks and into cash and bonds. As the National Association of Plan Advisors reported last week...

Despite the advent and adoption of target-date funds and other products designed to keep plan participants invested through market shocks, younger investors – who might not have experienced a downturn – still might panic, leading to higher trading activity, Austin argued.

"They might not yet have experienced a true market downturn like this," he said. "It's the first time they see their 401(k)s decline. They pull it out to put it into something safe. Unfortunately, though, they did it now when stocks have already gone down, which is what we typically see. People don't get back into equities until after they've rebounded. So, it's buying high and selling low. That's really what's happening."

Since then, it looks like the shock of potential high double- and triple-digit tariff rates (based off of trade deficit numbers) seems to be wearing away. Meanwhile, we have yet to see how these import taxes will actually end up looking in size and scope...

How and when, not if...

In an interview with Fox Business, White House National Economic Council Director Kevin Hassett said that more than 10 countries have already made "amazing" trade-deal offers to the U.S., and that agreements are a matter of when, not if.

That coincides with what Treasury Secretary Scott Bessent said last week... that the White House planned to negotiate trade deals with "military" partners first, and approach China (the target of everything) as a group for more negotiation.

Today, Hassett said...

The one question that I have open in my mind is, should we go one at a time, or should we announce a bundle all at once?

The "all at once" approach would probably send stocks soaring in an absurd fashion, like what we saw last Wednesday after Trump announced a "90-day pause" on most "reciprocal" tariffs. But a slow drip of "less bad" news would be welcomed, too, and could ease market jitters over time.

Still, you can never know what tomorrow will bring. As we wrote last week...

Negotiations with other nations could last through June. So it's reasonable to expect related "good" or "bad" or "less bad" news until then, at least.

As we wrote [on April 7], "Get used to this." Volatility – potentially in bullish and bearish directions – isn't going anywhere.

In the meantime, we're also keeping an eye on some other Washington, D.C. developments beyond the tariff war... like the prospect of Washington extending the Trump tax cuts... new deregulation legislation... and negotiations with Iran.

The latest in oil...

We've noted over the past few weeks that global oil prices have plummeted amid the market's volatility. You can chalk that up to Liberation Day, but there have also been a few important developments in the Middle East that have gone mostly unnoticed.

As Stansberry Venture Value editor Bryan Beach wrote in his latest monthly issue published on Thursday, the OPEC oil cartel "sent its own set of shock waves through the markets less than 24 hours after Trump's speech."

In short, on the morning of April 3, OPEC announced a surprise supply increase of 411,000 barrels per day in May instead of a previously announced 135,000 barrels per day. As Bryan wrote...

Saudi Energy Minister Prince Abdulaziz bin Salman – the de facto OPEC leader – announced the unforeseen production hike to, in the words of Bloomberg, "punish the group's cheats."

The move caught a lot of traders off guard. Essentially, three months' worth of planned increases will happen all at once... amid a time of heightened economic uncertainty and when oil demand is expected to fall due to tariffs.

So what's the full story? As Bryan wrote...

There's a lot going on here. We'll spare you much of the Gulf States drama. All you need to know is that for months, Kazakhstan and Iraq have been producing far more oil than they're allowed to and cashing in by selling these excess barrels in the open market. Such moves both weaken the OPEC alliance and harm OPEC partners...

In short, the cartel's big boy – Saudi Arabia – is sending a message to its smaller OPEC partners. Helima Croft, head of global commodity strategy at investment bank RBC Capital Markets, said...

[This] move appears to be more of a controlled sweating... We think a desire by the OPEC leadership to send a warning signal to Kazakhstan, Iraq, and even Russia about the cost of continued overproduction underlies the decision.

Analysts surmise another reason for the production hike is Trump pressuring OPEC into price-squeezing Iran out of the export market. A Bloomberg article explained it this way...

Additional crude from OPEC+ may also help Trump in his pledge to choke off oil exports from Iran, [Saudi Arabia's] regional nemesis. His administration has promised to renew its "maximum pressure" campaign to rein in [Iran's] nuclear program, and squeeze the Islamic Republic's exports by 90% to a mere 100,000 barrels a day.

Whatever the reasons for the supply increase, you can't argue where oil prices have been headed lately. Oil – as measured by West Texas Intermediate ("WTI") crude and the Brent crude international benchmark – is down more than 20% since its highs above $80 in mid-January.

Check out Bryan's issue for more on the story. He also shared a rare buying opportunity in a company that he's bullish about. Trading for less than 1 times free cash flow, Bryan says it's the cheapest stock he has ever recommended. These are the kinds of opportunities you can find when "everyone else" is scared.

We may have just seen 'peak pain'...

Last week, we wrote about how a "queasy" bond market appeared to be the trigger for Trump's big tariff pause. But the stock market was also a factor, as our Director of Research Matt Weinschenk wrote in This Week on Wall Street on Friday.

As Matt said...

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.

One way to find a panic point is by looking at how many stocks are making new highs versus new lows. The market can't go up if enough stocks are making new lows. As Matt wrote, that's exactly what we saw in the days after Liberation Day...

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...

Another indicator you can use to find pain points is the CBOE Volatility Index ("VIX"), which is often referred to as the market's "fear index" since it measures bullish and bearish bets on the S&P 500 over the near term. As Matt wrote...

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.

The VIX dropped close to 30 today, its lowest level since April 3.

Now, this doesn't mean stocks can't go lower from here – and at the very least, you should expect a volatile road ahead, even if the "worst" is behind us. But based on history and these patterns, the likelihood of last Monday repeating itself again soon is unlikely.

You can read the latest issue of This Week on Wall Street here or check out the video version here for free on YouTube (featuring Stansberry's Credit Opportunities editor Mike DiBiase as a guest)...

What to watch this week...

It's earnings season again...

Up first are the big banks and major names stuck in the tariff-war crosshairs, like semiconductor company ASML (ASML).

Will these companies pull their forward guidance, like Walmart (WMT) and Delta Air Lines (DAL) did recently? It seems to be the preferred move, rather than issue forward guidance that might be outdated in a few days as tariff policies "flex." We'll have to wait and see.

Also of note this week, Federal Reserve Chair Jerome Powell will give a speech at the Economic Club of Chicago on Wednesday.

With the next Fed meeting approaching on May 6 and 7, Powell's talk will likely be a stage-setter for what the market should expect from the central bank when it comes to interest rates next month.

So far, the Fed has been preaching a wait-and-see approach because of the uncertainties around tariffs – and their potential impact on inflation, growth, and the labor market. A few weeks ago, Powell said tariffs would likely raise inflation and lower growth.

We'll have more on the Fed (which has been overshadowed lately) in tomorrow's edition, and we'll see what Powell discusses on Wednesday.

New 52-week highs (as of 4/11/25): Agnico Eagle Mines (AEM), Alamos Gold (AGI), Alpha Architect 1-3 Month Box Fund (BOXX), Franco-Nevada (FNV), VanEck Gold Miners Fund (GDX), VanEck Junior Gold Miners Fund (GDXJ), SPDR Gold Shares (GLD), Kinross Gold (KGC), Sprott Physical Gold Trust (PHYS), Royal Gold (RGLD), Sandstorm Gold (SAND), Torex Gold Resources (TORXF), ProShares Ultra Gold (UGL), and Wheaton Precious Metals (WPM).

In today's mailbag, more feedback on our discussion about U.S. Treasurys from last week... Do you have a comment or question? As always, e-mail us at feedback@stansberryresearch.com.

"Hello Stansberry folks. Continue to love your work and enjoy my daily readings... Liked your summary on U.S. Treasuries. I don't think many people, especially Americans understand the consequences of a coordinated attack on U.S. Treasuries..." – Stansberry Alliance member D.C.

All the best,

Corey McLaughlin
Baltimore, Maryland
April 14, 2025