The trade deficit improved slightly in February, as exports increased by $8 billion while imports remained unchanged.
I don’t believe the trade deficit is the big issue here, as the countries that run a surplus with us reinvest those proceeds back into US assets.
Tariffs are 100% a tax on us. They reduce competition and leave us with fewer options.
I’m trying to keep an open mind but its hard when I hear the messaging such as “tariffs are tax cuts” and “foreign countries are paying the tariffs” that simply isn’t true and has been debunked for a while now.
Both the ISM Services and Manufacturing PMI’s missed expectations this week. With Services (roughly 70% of the US economy) coming in at a 9-month low.
Private sector payrolls increased more than expected (+155K) in March, a welcome surprise. We’ll get the NFP payroll report today.
The S&P 500 fell below my critical support zone (highlighted on the chart) that had held for weeks. I had a hunch this would happen, but I wanted to give it the benefit of the doubt until it proved me wrong.
This is now the biggest pullback since the 2022 market bottom. Essentially breaking the rhythm of the uptrend.
The next downside target I see is around 5150. Ultimately, my guess is the market won’t bottom until we get into the 4600-4800 range unless we get a significant policy shift.
Bottom line: We may already be in a recession. But even if we can avoid one, we still are likely to get a “valuation reset” because PE’s are simply too high (when adjusted for interest rates) too support such uncertainty.
And because PEs are well above average, unfortunately, that means they have further to fall before they normalize. I will have more on how I arrive at this assumption soon.
This is just my opinion based upon an educated guess. I have no idea what the market will actually do. Just like everyone else.