Week 22 (May 26-June 1, 2025)
Big picture:
As you are well aware, recent times have been marked by a steady flow of new developments related to trade, tariffs, taxes, deficits, and related economic issues. Keeping track of the daily changes and their implications can be quite challenging. As always, we remain diligent in our analysis of the markets, working to identify and avoid risky investment opportunities while striving to stay ahead of the curve.
For years, the old adage “signal over news” has served as a cornerstone of our investment philosophy, guiding us to prioritize technical and macro signals above the noise of daily headlines. This approach has helped us stay disciplined and focused on what truly drives market trends, rather than getting caught up in the constant churn of news cycles.
However, over the past couple of months, the landscape has shifted dramatically. News events—especially those tied to the unfolding trade war—have become so impactful that they now move markets in ways we haven’t seen in quite some time. Ignoring these developments would be akin to overlooking a significant chunk of the data that feeds into our analysis. As a result, while we continue to value signals as our primary compass, we’ve also learned to pay closer attention to news-driven catalysts, recognizing that in today’s environment, both signals and news play a crucial role in shaping market outcomes.
The market appears ready for a pause after recent moves, and we anticipate a period of sideways trading or even a modest pullback. While the risk of a full-blown recession has diminished, the environment still isn’t conducive to robust growth—think more along the lines of a growth slowdown or the possibility of stagflation rather than outright contraction.
That ambitious—and admittedly rather vague—forecast suggesting that 75 countries would reach new agreements within just 90 days now seems to be slipping further out of reach, much like the prospects for meaningful progress with China. As the days tick by, it becomes increasingly clear that the initial optimism may have outpaced reality.
In light of these complications, the Administration is likely to confront a tough choice: either scale back its objectives to something more achievable or brace for the lengthy and unpredictable process of seeking Congressional approval. Both paths present their own challenges and uncertainties.
Meanwhile, the ongoing delays in setting tariffs are poised to have a ripple effect, causing businesses to hesitate and postpone major investment decisions. The longer these policy uncertainties persist, the greater the risk that significant business activity will continue to be put on hold, potentially dampening economic momentum even further.
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