WHEN INVESTING BECOMES A LIFESTYLE YOU WEAR IT!

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ORGANIZED CHAOS…

In his first 114 days in office, President Trump has signed 152 executive orders, caused worldwide turmoil with his tariff agenda, and shaken not just the stock market’s confidence but also the treasury market and the world's confidence in the dollar as a reserve currency.

He has sparked inflation fears and has most of Wall Street bracing for a recession. The GDP dropped, and so did the stock market.

He has publicly denounced the Federal Reserve chairman, Jay Powell, and has turned world trade upside down while simultaneously ruffling the feathers of every major trade partner of the United States.

Although hindsight is 20/20, what seemed like a train wreck waiting to happen was part of the actual plan, and not an on-the-fly plan that appeared to be as sporadic and fleeting as the life span of Mayfly (Dolania Americana), which has a life span between 5 minutes and 24 hours.

It started with a hard ball stance on April 2nd, Liberation Day, which sent the market spiraling out of control, only to bottom out five days later on April 7th.

Wall Street’s concern went from dark room whispers to a fevered board room pitch, sparking a selloff in treasuries, which apparently got the attention of the White House, causing Trump to put a 90-day pause on the outrageous ‘Liberation Day’ tariffs.

 This was done under the banner that countries were lining up to make deals.

Could it have been a plan to raise taxes by 10%, indirectly—on the American business, passed down to the American people to offset his tax cut agenda? Or could it have been a play from the playbook of negotiation university?

At first, we weren’t negotiating, which was a ploy meant to shake up the world and warm everyone to the idea that if you want the world’s biggest consumer to consume, you better come correct.

Raising tariffs in such an extreme way would stop American businesses from purchasing internationally because it would evaporate their margins and cripple their businesses leaving no choice but to seek domestic alternatives.

But to paint it more vividly, the United States has a GDP of approximately 30 trillion and holds the distinction as the world’s biggest consumer. So, what if we stop buying from other economies that we’re dependent on? Our dollars and our veracious appetite for consumption would cripple economies like Canada and Mexico, especially seeing how we are 67% and 80% of their GDP, respectively.

This felt like a declaration of war based on the retaliation that followed, but again…was this all part of the strategy that was laid down in the war room of the White House?

In order for this plan to work, the entire world had to believe Trump and his administration was serious.

And since he has roughly 13 billionaires in his cabinet, they are far from scared money—more like prepared money, so inflicting pain on the economy would be easy, especially if they were sheltered from its destructive impact.

And what better way to sell the deal than to cause disturbance in the world’s largest markets—the stock and bond markets. The news outlets played an integral part as well because Trump knew that our trading partners were now forced to listen.

So, he began a misinformation campaign built to throw everyone off guard and it worked. Countries started to form a line around the negotiating table, considering trade dropped between 35% and 50% at the ports.

 A trade war cuts deep on both sides but at this point it’s a matter of who can hold their breath under the longest. Trump toyed with China through the media and China took the bait.

They first made it seem like they were talking to China, forcing China to state they weren’t in negotiations with the U.S., but what they didn’t see was that Trump was taking their temperature.

Now that he knew they were listening, it was classic Trump using the media to get his message through, stating that he was unwilling to negotiate from his 145% tariffs. Although this is a tariff on American businesses and if it stops them dead in their tracks it also says that their biggest customer will be closing down shop.

So, the leverage was laid and lo and behold, they struck a deal with the UK and China. This sent the markets shooting up while killing recession fears. This also was a level set for the next line item in their agenda, “Tax Cuts”!

 WHEN INVESTING BECOMES A LIFESTYLE YOU WEAR IT!

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THE PSYCHOTIC NEGOTIATOR PART 3…

What an eventful week. Inflation happens to be reaffirming the Federal Reserve’s wait-and-see approach as the CPI headline number of 2.3% inflation is indeed headed in the Fed’s projected direction. The PPI came in soft as well by .05% at 2.4%.

So, producer prices are coming down and so is inflation and with the overhanging tariff discussions, Jay Powell’s band of merry men feel no need to lower rates.

The street is still predicting two rate cuts. I don’t see any rate cuts happening this year at all unless we see a huge spike in unemployment, which currently sits at 4.2% for the second consecutive month. This could mean two things…(1) companies aren’t willing to lay off workers because they see the sporadic and temporary nature of tariffs’ potential impact and may have a hard time hiring workers in the future or (2) they aren’t seeing any real serious impact from the tariffs’ current state.

Earnings season is shaping up nicely as of the week of May 9th with over 90% of companies reporting earnings. 78% beat expectations resulting in very little tariff impact.

The S&P 500 has regained all of its losses starting the year at 5868.55, currently sitting at 5958.38. The VIX is headed south below the 17.24 handle and gold is starting to show signs of weakness.

All three indexes are leading the charge towards their overbought levels as the China trade agreement news crushes recession fears and Wall Street firms rush to raise their S&P 500 targets.

What appears to be a giant head fake in terms of tariffs has put a euphoric premium in the stock market as many stocks seem to have made a V-recovery, which means that the short term rally could be losing steam.

President Trump’s Saudi Arabia, Qatar and United Arab Emirates trip has been extremely fruitful for companies such as Boeing, Google, AMD and NVDA.

The Trump administration announced several deals starting with massive economic investments.

The visit secured over $2 trillion in agreements, including:

• $600 billion investment commitment from Saudi Arabia

• $1.2 trillion economic exchange agreement with Qatar

• $243.5 billion in U.S.-Qatar commercial and defense deals

• $200 billion in U.S.-UAE commercial deals

• Strategic Partnerships in Technology and AI

Major U.S. tech firms, such as Google, announced new collaborations with Gulf partners to accelerate AI innovation, launch a global AI hub, and expand tech training programs.

• Strengthened Security and Defense Cooperation:

New defense and security agreements were reached, particularly with Qatar and Saudi Arabia, enhancing regional stability and U.S. access to strategic bases.

• Focus on Economic Growth and Job Creation:

The deals are expected to create highly skilled jobs and open new career pathways in both the U.S. and Gulf countries, especially in technology and energy sectors. While Trump was overseas practicing the art of the deal, back home—his tax bill experienced some resistance in the house.

The bill was blocked by a group of hardline Republican members who joined Democrats in voting against it, citing concerns over the bills cost and demanding deeper cuts to Medicaid and other government programs.

The committee rejected the bill by a 21-16 vote, with five Republicans opposing it. The main point of contention with the Republican hold outs is the disagreement over Medicaid cuts and the state and local tax (SALT) deduction cap, which are key sticking points for both fiscal conservatives and members from high-tax states.

And to add insult to injury, Moody’s downgraded the U.S. governments debt from Triple Aaa to Aa1 citing persistent increases in government debt, rising interest costs, and a lack of effective fiscal reforms.

Their 4 main reasons for the downgrade:

• Rising Debt and Deficits: U.S. government debt and annual deficits have grown significantly over the past decade, with projections of the deficit rising from 6.4% of GDP in 2024 to nearly 9% by 2035.

• Higher Interest Payments: Interest payments on the national debt are increasing, making the fiscal outlook more challenging.

• Political Gridlock: Moody’s cited repeated failures by Congress and successive administrations to agree on measures to control deficits and spending, particularly on entitlement programs.

• Policy Uncertainty: Ongoing debates over tax cuts and spending, and broader political uncertainty, have contributed to concerns about fiscal management.

Trump and his allies sharply criticized Moody’s actions. Trump’s communications director, Steven Cheung, dismissed the downgrade as politically motivated and specifically targeted Moody’s Analytics chief economist, Mark Zandi, calling him a political adversary.

And just to think we are only in the first 120 days of Trump’s presidency. Stay tuned as the turn of events becomes more spicy by the minute.

If Trump can pull off his tax plan, I foresee inflation coming in line, Trump getting what he wants, the market returning to balance, and the year ending higher than it started on all indexes.

WHEN INVESTING BECOMES A LIFESTYLE YOU WEAR IT!

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Quick Links…

Is It Time To Buy China?…

Is The Consumer Tapped Out?…

Tariff: The New Tax…

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Kevin Davis Founder of Investment Dojo and Author of The C.R.E.A.M. Report