🍔Unsustainable Fiscal Debt

We've seen this market before...

SPX had a healthy pullback this week after the furious short squeeze of last week. A bit of backing and filling is expected in a bull market, and we think this rally can continue to new highs. As a reminder, we remain on our April 13 buy-signal when we re-entered the market near the bottom and continued buying in the subsequent weeks. Since then, SPX is up roughly 10% and the QQQ 14%.

That is the power of market timing. We started switching to cash in February and avoided most of the 20% selloff, then jumped back in when the waters looked murky! Paid subscribers heard our calls in real time — all published and verifiable in the library.

Don’t just sit there when the market is selling off! Start timing the market to improve your portfolio returns:

Tariff war redux

Let’s get Friday’s news out of the way first. Trump announced on Truth Social that if Europe doesn’t settle on a deal soon, he would impose a 50% tariff on the bloc. He also announced a 25% tariff on Apple if they don’t start making iPhones in the US. SPX initially sold off on the news, but recovered throughout the day.

After seeing the tariffs on China play out (i.e. big initial threats to spur action, then walking it back later) markets are now calling Trump’s bluff. Markets have figured out Trump’s pattern, and that he has no intention of keeping tariffs high. He just wants to apply pressure and bring people to the table.

So we saw a tepid response to this announcement compared to the Apr 2 tariff announcement. All of this is well understood. But the bigger worry in our minds is that Trump feels emboldened to act aggressively again now that SPX has recovered to higher levels. Conversely, when the market was selling off, Trump backstopped the market with positive announcements. In options terminology, we call this a strangle.

He did something similar in 2019 during his first term. When the market would recover he’d escalate again. We are now on the high part of the cycle, which means we should expect more anti-cyclical, anti-fiscal, or anti-trade rhetoric in the coming weeks.

Does this mean the SPX is stuck in a trading range? Read on to find out…

Unsustainable US debt

US fiscal matters have dominated news headlines again over the past week, as investors continue to grapple with unsustainable future debt levels…

The rest of this article is for premium members. Today’s post covers:

• Unsustainable US debt

• Bitcoin as a leading indicator for stocks

• We’ve seen this market before, and we know what happens next

• Hedge fund positioning short again

• Our current portfolio and top sector picks