We're Not 'Cooked' Yet
Dear subscriber,
The White House grounds became a Tesla (TSLA) showroom on Tuesday, as President Donald Trump showed his "confidence and support" for CEO Elon Musk.
Earlier that day, on his social media platform Truth Social, the president had vowed that he was going to buy a brand-new car from the electric-vehicle maker.
And it wasn't an empty promise – Trump paid full price for a flashy red Tesla Model S.
He told reporters that he'll keep the car at the White House and let his staff use it, as he's "not allowed to drive."
It's hard to say whether that's because he's a lifelong New Yorker and limo passenger and hasn't driven a car for quite some time... or simply because there are rules against U.S. presidents driving on public roads.
Either way, the public purchase was very clearly intended to restore confidence in Tesla's stock price.
As one of my most experienced analysts at Stansberry Research told me on Tuesday, "If Tesla doesn't close up today, we're cooked."
He thought that if Tesla's stock kept plummeting, despite Trump's intervention, there was likely much more downside to be seen in the broader market.
Well, Tesla managed to eke out a gain of almost 4% on Tuesday and another 8% on Wednesday...
So Trump's gambit worked... though not by much. I suspect he was hoping to get a little more juice out of his endorsement.
But alas, as of this writing, Tesla is once again trending down, and the market is falling. And it's falling due to uncertainty over Trump's trade war.
You can't always pin a specific narrative on market moves. Sometimes it's just noise. But given that this fall is specific to U.S. stocks and the sectors that will be hurt most by Trump's tariffs, the picture is clear...
If Trump's trade war doesn't end, we're cooked.
Now, as I said last week, the market hasn't completely broken down. So there's no need to panic just yet.
But we are approaching a major inflection point today. And there are two things you need to pay attention to...
The first is the likelihood that we'll enter a recession.
The only question we've heard in the news this week was, "Are we headed for another recession?"
Even Trump, when asked by Fox News' Maria Bartiromo if he was expecting a recession, said, "I hate to predict things like that. There is a period of transition."
There's not a lot of confidence in that answer.
But for now, we're still in the clear. Certain economic indicators are holding strong. Just look at initial jobless claims, for example. They indicate layoffs, and the most recent data shows that they're still well below recession levels...
Even with the Department of Government Efficiency's recent cuts, the labor market is stable. February payroll numbers were pretty good. And annual wage growth remains steady at 4%.
There are also measures of recession probability based on the yield curve. They aren't perfect predictors, of course, but they put the odds of a recession in the next 12 months at around 27%...
So the data isn't flashing "recession" today.
But as we've covered in these pages, the market is still closely watching Trump's tariff moves.
Investors worry that if Trump's trade war escalates, with tariffs ticking higher and spreading to other countries, U.S. economic growth will slow and possibly tip into recession territory.
That means the second thing to watch is the "feedback loop" – in other words, how far the market needs to fall before Trump is eventually forced to pull back on his tariff plans.
This is where Trump buying a Tesla comes in...
It's not new for government officials to try to move markets. The Federal Reserve and other central banks will often make verbal commitments to stimulus or to "do whatever it takes" to support the economy.
Those statements, when credible, can create confidence and turn markets around, without any action even being taken.
But we've never had a president try to boost a single stock the way Trump did on Tuesday...
On the surface, this may look like he just wanted to help out his friend Elon Musk.
I think there's more to it than that.
The Tesla push was a trial balloon. Trump wanted to see if he could juice the markets with a bit of confidence, rather than take real action like easing off on his tariff plans. He was trying to buy himself a bit of breathing room.
Tesla shares rose (briefly). But the broader market didn't really react. It instead continued its decline.
Still, it shows that Trump is getting closer to his breaking point...
Wall Street expects there's a "Trump put."
In the options market, an investor can use a "put contract" as protection on their investments. (We won't get into the nitty-gritty. Just know that puts act as insurance against stock losses.)
There's a similar idea when it comes to the Federal Reserve. In the 1990s, Fed Chairman Alan Greenspan was a proponent of economic stimulus. If the market fell, he'd lower interest rates to turn things around and protect investors. This led to the term "Greenspan put."
The concept has been attributed to a few Fed chairs over the years. We've seen the Bernanke put... the Yellen put... Now, it's just called the "Fed put."
All that's to say, if the market tumbles, the Fed will step in and protect you.
People thought we'd get the same from Trump – that when the market reaches a certain point, Trump would step in and rescue it.
Bank of America estimated that point would be when the S&P 500 Index reaches 5,783, its closing price from Election Day.
Others thought a decline of 10% would lead to a Trump put.
But we've blown through the first estimate and are now crossing the second. So apparently, we haven't hit the Trump put yet...
Last week, Trump's Treasury Secretary Scott Bessent said there's no Trump put.
I disagree. I think there is a Trump put... I'm just not sure how far the market has to fall before we see it.
I'll be watching. Right now, we're in a race of sorts between an actual recession kicking off and Trump listening to what the market is saying. We'll have to see which cracks first.
What Our Experts Are Reading and Sharing...
The biggest hurdle for Trump will be inflation. If tariffs raise prices, that means the Fed will be less likely to cut rates and stimulate the economy. However, as our own Corey McLaughlin reported in the Stansberry Digest, inflation numbers posted this week fortunately came in below estimates and calmed the market a bit.
Alphabet (GOOGL) announced a huge breakthrough this week... this time in AI models for robots. For decades, robot movements have been painstakingly coded by hand. But new models from Google DeepMind – called Gemini Robotics – use modern advances in AI to help robots learn to move on their own. As the Financial Times reports, one robot was even able to make an origami fox.
The post-pandemic travel boom lasted nearly five years. But now, airline CEOs are warning that domestic travel has started to slow, weighing on revenues. The Wall Street Journal said Delta Air Lines (DAL), American Airlines (AAL), Southwest Airlines (LUV), and other carriers have recently cut their guidance as a result. The bigger question is whether this portends a broader slowdown in consumer spending.
New Research in The Stansberry Investor Suite...
At Stansberry Research, we have a lot of tools to help investors find the right way to put their money to work.
One of the most unique, and valuable, tools we have is our Capital Efficiency Monitor.
This monitor distills a lifetime of investing experience and a mountain of fundamental data into a short list of high-quality, capital-efficient businesses – the types of companies that have made legendary investor Warren Buffett so successful over the years.
As Stansberry's Investment Advisory's Mike DiBiase writes, "There's no greater secret to becoming a successful investor than understanding 'capital efficiency.'"
So this month, Mike gives a full breakdown to help you understand just what capital efficiency is. He'll show you how this concept turns simple businesses into corporate powerhouses... and how it leads to stellar returns for shareholders.
Then, he'll show you one of the strongest and most capital-efficient companies out there... one we once referred to as "our best 'no risk' opportunity ever."
This is a business you likely know well. And it currently trades at bargain-bin prices. In particular, its enterprise value ("EV") to earnings before interest, taxes, depreciation, and amortization ("EBITDA") multiple is 11.5 times.
(Don't worry, if you're not familiar with EV and EBITDA, they're key valuation measures Mike will explain.)
As you'll see, this company is the cheapest it has been in years. 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
What do you think about This Week on Wall Street? Send any and all feedback to thisweek@stansberryresearch.com. We read every e-mail you send in.