The China goods may be cheap when bought in China, but the fuel to get them where they need to go, the cost of labor, etc etc... that's an American thing. Hence the 10% rise yoy. The prices we see today are here to stay. Tariffs will certainly put upward pressure on them. But make no mistake, if the Fed does a big cut out of the blue and Trump also drops tariffs... on top of the whole drill baby drill thing... when the dust settles there won't be another 10% rise yoy. The economy will take off, on animal spirits alone. Ya know the difference between now and 2000.... our Nasdaq 100 makes money. The forward PE is about 24 +/-. Is their room for some multiple contraction? Yes. But are these companies headed for oblivion? No way. I get the feeling that all things "hate Trump" are clouding the playing field here a bit. Like I said earlier, my bottom on the QQQ's is about 443 +/-.
Trump has made no bone about firing Powell. He just hasn't found a way to do it. But knowing little about his modus operandi, if the market nosedives and Powell refuses to make an emergency rate cut, which Trump will likely demand from Powell, Trump will blame Powell for the downturn. So, if you were to ask me what Trump's real motive is, it's to fire Powell. And If that takes the stock market to fall off the cliff, so be it.
Well, it's not about what the market does, it's about what the Fed prognosticates the economy to do going forward. And if the FRB foresees a recession, 1) the markets will surely take a dive if they already haven't and 2)... Trump won't have to coerce Powell into cutting rates under the auspices of that or be fired... Powell will do it anyway. He's gonna do his job according to what his data tells him. If tariffs spiral us toward a recession or worse yet stagflation... Powell will not just say "go ahead and fire me, I'm not cutting rates" for the sake of insolence.
But is the inflation contained? Moreover, will Trump's tariffs not ignite another inflation down the road, say, in 3-6 months? I don't believe Powell can or will cut rates, not because he's insubordinate to Trump but doing so will only stoke inflation further.
Yes. However, if you started trading 5 years ago or more you already experienced the covid crash in 2020 and the bear market in 2022 when inflation spiked and the FED started hiking rates. The common thing with all these down turns is that they weren't sustained and rather quickly recovered. This is in stark contrast to the dot com bubble bursting in 2000 where the stock indices took 7 years to recover by 2007 - just before the GFC initiated a new and worse plunge. That's why I'm sure a lot of investors or traders today genuinely don't believe a drop is sustainable since they never experienced it.
I'd like to point out that the effect of tariffs and other measures is not just a switch that you can turn on or off. If these disruptions continue for a few months, it will take years to get back to normal, if ever. COVID drop and recovery are not comparable to the current situation, in my view. Plus Ukraine, Middle East (multiple points) and Taiwan, all of which could peter out or explode.
That's basically what I said. Powell is gonna do his job as he see's fit to do it. It's all in the data for him.
That's a good point, but to a great extent it probably depends on which consumer products we're talking about. Energy, metals, lumber, and agricultural goods will work price levels out in a relatively short amount of time I would think. But yes there will be some lag. The auto's, ahhh, you're right it might take a bit. If tariffs are lifted though, I think the automakers might just eat the higher costs of inventory that was already built under tariffs, charge it off as a one time expense on their balance sheets, and resume selling cars at wherever they were before. This is probably what Powell was talking about when he again used the now 4 letter word:"transitory."
I would think companies are hedged through options and commodities. It's the consumers that are basically screwed in the long run. Or were you talking about the stock market peeps like us who think the market can only go up?