Here's the Deal - March 31, 2025

Economy: In Slowdown

Market Cycle: In Correction. Possible Bear Market

_{Week 13 of 52 for 2025: 25% of the way through 2025}

Table of Contents

• Weekly Note:

• Trump on the verge of losing support of the Oil an …

• Q4 2024 GDP revised up a touch.

• PCE: Pretty close to expected.

• Trump decides to Make Fraud Great Again

• It’s Tariff Week as “Liberation Day” is upon us.

• Markets:

• Significant Economic Data from the previous week:

• Economic Data to watch this week:

• Quote of the Week:

Weekly Note:

Markets got pounded last week with tariff double talk reigning once again, as the “plan” continues to change day-by-day and hour-by-hour. 4th Qtr GDP gets a small revision higher. PCE offered no big surprises on the battle against inflation. Trump continues to lose supporters from the business world also decided that fraud is a-okay.

But I think it’s important to cover something first...

You should probably know that I was a very early supporter of Donald Trump’s bid for the presidency in 2015. Following politics closely for the past few decades made it obvious that it was time for a shake up in the Federal Government for a number of reasons.

Hell, I’ve voted for the guy three times now and brought many over who were skeptical 10 years ago and are now avid supporters. But fewer things are more dangerous to a country than blind loyalty to a person or party.

I tell you this because I have obviously been very critical of him and his administration in the past few weeks. This is not at all the intent of this project, however these are economic issues and deeply troubling based on historical outcomes.

Unfortunately, I’m forced to do so again this week due to the administrations actions pardoning convicted fraudsters who preyed upon the middle and working classes. So I think it’s important for you to know that my criticisms are not coming from place of anti-Trump or TDS (Trump Derangement Syndrome) nonsense. It’s coming from a place of the guy I’ve voted for, supported, and defend(ed) is making some seriously concerning decisions on a topic which I happen to provably know and understand very deeply.

And from my point of view as a three time supporter who lives in the markets daily and has studied economics and credit cycles thoroughly going back to the end of WWII; these economic policies and now pardoning overt fraudulent behavior are deeply concerning.

I also do not have enough faith to think that this is all some sort of 5-D chess move in negotiating against China. Nothing would make me happier if that ends up being the case. If it is, I will be one of the first to acknowledge the plan’s genius and that I was wrong. I hope I am. But the administration has not done anything to deserve or warrant that level of faith at this point. To the contrary, they’ve done the exact opposite.

With all of that being said, I get the sentiment around government waste and the demand for transparency of government spending. It is absolutely warranted. It’s why I asked sitting MN Senator Rod Grams about it on a HS class trip to Washington DC a quarter century ago.

This Week in Tariff Talk

The week started off strong as President Trump signaled a shift in tariff policy on Monday morning, narrowing the list of planned April 2 tariffs to what he called the "Dirty 15." This news sent markets soaring to kick off the week.

However, that optimism was short-lived. By Wednesday, Trump announced a permanent 25% tariff on all imported cars and trucks. The impact? According to financial services firm Wedbush Securities, this move is expected to drive vehicle prices up by $5,000 to $15,000.

The most shocking development in the tariff saga this week was President Trump’s warning to U.S. automakers not to raise prices in response to the new tariffs (article will be posted in the replies). But while a president can set policy, they can’t dictate how businesses respond to it. Companies operate based on economic realities, not government commands. After all, this isn’t China.

Trump on the verge of losing support of the Oil and Gas sector?

The Oil & Gas sector, one of Trump’s earliest and longest serving allies, is now joining the growing list of business owners and industries pushing back against the administration. Industry leaders are warning that tariffs are already driving up costs and creating too much uncertainty to safely invest in projects that could help lower energy prices.

Bloomberg provided an excellent summary of the latest Dallas Fed Energy Survey, which I will put in the replies section of this newsletter. The article includes a link to the full report. It’s well worth reading, no matter where you stand politically, as it offers key insights into how these policies are affecting businesses.

Q4 2024 GDP revised up a touch.

The government’s third and final revision of Q4 2024 GDP nudged growth slightly higher, from 2.3% to 2.4%. While this number could still see minor adjustments in this and next July’s annual revisions, any changes are unlikely to be significant.

Bottom line: Q4 2024 was another solid quarter of economic growth for the U.S.

PCE: Pretty close to expected.

No major surprises on the inflation front this week. Core PCE came in slightly above estimates, while headline PCE matched expectations.

Long-term trend is down, short-term (monthly) trend is up, but possible flattening out. A sustained move back up would be a real concern, so this will be key to continue watching in the coming months.

Trump decides to Make Fraud Great Again

Friday was the day President Trump decided to make Make Fraud Great Again. He issued pardons for four individuals convicted of blatant financial crimes.

The most egregious of the three was Nikola founder and former CEO, Trevor Milton, convicted in October 2022 on securities and wire fraud charges. He was found guilty of deceiving investors about Nikola’s electric and hydrogen-powered trucks, including rolling a truck downhill to fake its functionality. A textbook case of investor fraud.

Having had limited (self-induced) firsthand experience with Nikola while they were setting up their manufacturing facility in Phoenix, this wasn’t a huge surprise. And is something I began watching closely when the stock screamed higher in mid-2020 and the allegations first surfaced in September 2020 in a short report from Hindenburg Research.

Milton was sentenced to four years in prison and a $1 million fine in December 2023, though he remained free on bail while appealing. Thanks to the pardon, his sentence is wiped clean, and he may not have to pay restitution.

When asked why he pardoned Milton, Trump gave a Kamala-esque, incoherent response, filled with easily dis-proven claims, including the false assertion that Milton was “exonerated” in Utah.

I’m sure the fact that one of Milton’s lawyers is Brad Bondi, brother of US Attorney General Pam Bondi, had nothing to do with the pardon…

Later in the day Trump also pardoned BitMEX founders Arthur Hayes, Benjamin Delo, and Samuel Reed, who pleaded guilty in 2022 to violating the Bank Secrecy Act. Their crime? Failing to implement basic anti-money laundering (AML) and know-your-customer (KYC) measures at their cryptocurrency exchange. They received probation and fines.

Some might argue the BitMEX convictions were politically motivated, given the Biden administration’s aggressive stance against crypto, but the fact remains that they knowingly flouted existing securities laws for years while other crypto exchanges, like CoinBase, were actively and openly meeting current securities laws while pushing to help regulators make the system safer for the average person.

But that wasn’t the last of it on Friday as viral “Hawk Tuah” influencer, Haliey Welch, announced that the SEC is no longer pursuing her for running a crypto pump-and-dump scheme. The same one covered in Here’s the Deal’s "WTF of the Week" from December 16, 2024.

I’m sure it didn’t hurt her that Trump and Melania ran the same pump-and-dump scam on their followers the week of the inauguration.

To top it all off, this happened the same week the Senate voted to overturn the Consumer Financial Protection Bureau’s $5 cap on bank overdraft fees.

It was a solid week for the elites. Not so much for middle-America or the working class.

It’s Tariff Week as “Liberation Day” is upon us.

Wednesday, April 2nd is what President Trump is calling “Liberation Day”—the day he plans to roll out a fresh wave of U.S. tariffs.

The big question: How severe will these tariffs be, and how quickly will affected countries retaliate?

The truth is, I have no idea what will be announced. My concern is that the President and his administration doesn’t either at this point, because that is consistent with how the tariff situation has gone the last couple months.

There is now so much about this administration that I hope I am wrong about. Having no real short and long-term tariff strategy is one of them at the top of the list.

Markets:

This past week was when markets confirmed their newfound weakness and the bears took firm control.

As discussed in last week’s Here’s the Deal, we were watching how the Rising Wedge patterns would resolve to get an early read on the market’s next move. The answer came loud and clear: they failed after briefly moving higher. A classic bearish signal.

$SPY ( ▲ 0.63% ) S&P 500

The fact that SPY failed before it reached the lower target of $581.50 (as well as the failures of DIA and QQQ to reach there respective lower targets of $428.80 and $503.82) confirms to us that it is now a much different market environment than has been the case since Oct. 2022.

$DIA ( ▲ 0.58% ) Dow Jones Industrial Average

$QQQ ( ▲ 0.73% ) Nasdaq

IWM Russell 2000 (Small Caps)

While markets began the week gapping up over 1% on Monday out of the rising wedge patterns highlighted last week, they were unable to hold the important level of 575ish on Wednesday morning which is when yours truly sent out the below posts:

Result: Failure

$VIX ( ▼ 1.19% ) Result: Volatility ripped back up.

This VIX trade has continued to work since last Summer when The Economy Tracker signaled that it was time for sustained higher volatility.

When the hedges (insurance) continue to outperform the rest of the stocks in a consistently profitable portfolio, it’s a great signal of broader weakness in markets and something in which to pay attention for the economy in the months ahead.

The culprit instigating markets lower was once again the resumption of tariff rhetoric.

This offers us more proof that President Trump and Treasury Secretary Bessent have been serious in saying they want lower interest and mortgage rates, and they want them fast. (Something highlighted in the March 10, 2025 edition of Here’s the Deal.) Which at this point requires weaker asset prices, such as stocks.

The hard failure of markets on Friday morning was the line in the sand for me. My outlook going into the day was if markets were able to resume their uptrend after testing their opening level that day, I was looking for a strong ending to the week. If they failed, then it was time to get off the Bull train and become a Bear. The result was a hard failure. The failed moves out of the Rising Wedges provided yet more confirmation of continued market weakness compared to pre-2025.

The potential set up in DOW Chemical highlighted a few weeks back also failed this week along with a number of other set ups in the materials sector. As most sectors within the US continue to also confirm sustained weakness.

Overall, not a great sign coming from markets. While I am not sure if the actual top is in for markets for the current credit cycle, I do believe this is more than just a typical correction in a strengthening market.

When this correction is over, I am looking for more defensive sectors like Healthcare, Utilities, Consumer Staples, and precious metals to continue to show relative strength. I am also looking for markets and companies around the world to continue to outperform the US as they have that past few months as money seeks better value currently offered outside of the US.

April is typically a very good month for markets. I actually expect that to be the case this year after some continuation of weakness first.

We will find out soon of that is the case. But looking at charts on Sunday afternoon, the market looks rather ominous and feels heavy rolling into the new week.

Head on a swivel.

Significant Economic Data from the previous week:

Economic Data to watch this week:

Quote of the Week:

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