Is President Trump Trying to Crash the Stock Market?
🎢The themed wild roller coaster ride called Mr. Trump’s Wild Tariff Ride is providing lots of thrills and spills for the globe. I wonder if Disney or 6 Flags are designing a roller coaster in his honor, perhaps one that stops and goes backward?
In the middle of this tariff threat escapade is President Trump’s style of engagement and his habit of sudden, angular turns, somewhat like a bucking bronc at the Calgary Stampede hoping to send cowboys face first into the ground. And there’s media thrashing too as the President trashes and humiliates Canada, threatens to push them into bankruptcy and take them over for pennies on the dollar. He’s really giving Canada an extra thrill.
Is much of his current engagement with Europe, Canada, and the Middle East just a distraction away from the “Trumponomy transition” at home? It’s funny that no one thinks he’s capable of political strategy.
In fact, Trump’s NO RIDERS policies are threatening the stock market, commodities markets, small business, housing market, and flattening international trade and supply chains. Add on some expected inflation and many onlookers are justified in thinking it’s deliberate and that we might be headed for a crash.
Will 6 Months Be Enough to Do it?
However, in the long run, past 6 months ahead, US businesses and the US economy will come out better, perhaps without trade deficits. Currently, it’s not doing badly and has some strength, which makes it harder for Trump to send reeling. He’ll have to try harder to create a Trumpcession. Erasing a trillion-dollar trade deficit alone would be an impressive accomplishment and send the stock market soaring. A trillion is a lot of money, and with certainty about the US economy, investors will definitely be irrationally euphoric if that happens.
But how to get there? Well, one way to fix things might be to crash the stock market and crash the housing market too.
The fact is, everything in the US is overpriced, unaffordable and low value for the dollar spent. So wouldn’t it be better to push the reset button and get prices way down? And what if the US dollar was to crash too? US products would be much more competitive. And as it stands, China’s prices are falling and countries may lean to doing business with them instead.
When Trump won the election, the dollar rose as global investors felt that in a time of great economic change, the USD was the safest place to be. They went all in and the dollar rose high. US GDP wasn’t going up, it was optimism and speculation about the future.
Somehow, Creating the Critical Mass Event
Overall, these tariffs and costs make the US economy uncompetitive. It’s too expensive to buy anything from the US. Add on tariffs and it could launch inflation and create a sudden downturn. Tariffs however, are fast-acting, and the counter-tariff action that’s happening against the US threatens to curtail US exports. Tariffs are the best way to crash.
But is all that sufficient to crash the stock market, job market or housing market? My view is the President would have to synchronize it to get it to critical mass, where the current economic and market supports fail.
Of recent, Trump has not said anything supportive of lowering interest rates, helping the stock market or housing market, keeping inflation under control. Instead, he’s full-on taunting other nations such as Canada in the media and installing 25% trade tariffs. There is no way countries including the US economy can adjust that quickly, and he knows this.
At this point, he can begin rolling back the tariffs, but why would he? He’s pro-American, is desperate for some economic statistic wins, and he wants to be lauded for creating some US jobs. As time passes, more Americans will be employed and impressed with his initiatives. Their incomes will rise and the US government will have tax inflows that they haven’t seen in years.
The uncertainty of his policies and the tariffs makes investors withdraw from investing because it’s just too risky.
But what Would Cause a Stock Market Crash?
I’ve outlined that in another post, but this year, the most likely precipitators would be:
- Rising inflation causing J Powell to raise the Central rate
- US import tariffs cause higher supply costs to raise prices thus slowing consumer spending
- Raising lumber, steel, aluminum, and copper prices makes housing too costly
- Sudden loss of government jobs is too much for the US economy to adjust to
- Sudden withdrawal of investor interest in the AI revolution
- Job loss grows this spring to cause consumers to shut down their spending habits
- A loss of Canadian travelers, home buyers and exports to Canada (US top trading partner)
- Destruction/blocking of supply chains which are difficult to repair
- The vocal/blowhard trade secretary who disparages other nation’s complaints about all this
- A vocal/blowhard President who says there will be casualties in this pro-US transition and whom disparages other countries and says the tariffs are going to last to create friction in relationships.
When you take a big-picture perspective it begins to look like he’s willing to crash the economy and stock market. He could push everything to teeter on the edge until he gets the results he’s looking for. Is he the Kamikaze President?
And what if he does crash the stock market and economy in the next 6 months. The next 3 months will likely slow and many market forecasters are predicting GDP lower than 2% this year.
The key factor is the overvalued, ballooned stock market. The Dow Jones, NASDAQ, S&P, and Russell 2000 indexes are grossly overinflated in view of what’s going on right now. It seems investors haven’t quite gotten a focused view of how things really are. The euphoric mania about the AI powered road ahead hasn’t really hit any potholes yet, just a few speed bumps.
In 2 weeks, on April 2nd, we’ll find out if he’s serious about enforcing those sweeping reciprocal tariffs. I believe he will go through with them, because so far, nations around the world don’t want to play fair on trade. They feel justified in tariffing US products. It would take time and something extreme to make them back down from their import tariffs. They’ll wait for Trump to flinch. But I think he feels he’s holding all the right cards and will continue until he wins his case.
There’s More Damage he can Inflict before April 2nd, and Then Afterward
What is the final tipping point or critical mass event that will send the stock market crashing? When would investors say, this isn’t worth investing in, and begin the great selloff? Things will have to get worse. The best way would be to send inflation high causing Powell to jack up the lending rate. US consumers would have be fed a lot of negative news from the Dem media, and a staunch refusal by Trump to end the tariffs. Soon, the auto industry in particular will strain under a lack of supply and high costs. Production will slow. The auto sector might be Trump’s poster child helping to send out negative vibes via the media.
A positive from all of this, is a push to American companies to improve their productivity, cut costs, and use technology better to compete internationally. Because with high costs, US producers cannot compete. Costs have to come way down. And how would you get costs/prices to suddenly drop this year?
So the answer to the crash questions is likely Yes, he knows what he’s doing.
Keep in mind tens of millions of American homebuyers would love to see a crash in the housing market and mortgage rates. And there are millions of Americans with cash in the bank ready to buy stocks on the dip. That’s why some say a once in a lifetime investment opportunity is about to happen.
Important question for Canadians and Americans: Will Alberta separate from Canada. It’s important to know.
See more on the US housing market forecast and the US stock market forecast. Are Tesla, Nvidia and Palantir the most investible of the AI stocks? Which might be the very best stocks to buy right now?
