23-March-2025: Interesting little piece by Marcus Padley in his Saturday email (yesterday, March 22nd), titled "Man in the moon", but with an image of a man (or woman) ON the moon rather than in it. Pfft. Semantics.
Market Summary - Uncertainty is the enemy at the moment - nothing has gone wrong in the numbers, growth hasn't slowed, inflation hasn't picked up, but one thing is clear - the stock market, the Fed, the world, is trying to come to terms, to price, policy uncertainty under Trump. It is hard because he is seemingly making things up as he goes along. What we see is, I think, what we are getting. Policy on the run, thoughts that manifest themselves in policy and policy changes without structure, research or a master plan. The result is volatility, and the catchword of the week (thanks to the Fed), is "Elevated uncertainty", and that is why the stock market is down 10% and nervous.
It's an opportunity - It is wasted effort to get frustrated by Trump and the uncertainty he has created. Instead, you have one job. Exploit Trump. Exploit any market weakness created by his impact. Be the Man in the Moon. Looking down on the situation. Objective. Unemotional. Logical. Spock. Celebrate Trump. Celebrate the uncertainty. Trump is going to provide us with some fabulous buying opportunities, and the debate for us at the moment is whether that opportunity is already here, or not. With the uncertainty of April 2 ahead of us (reciprocal tariffs detail), the answer is still "not yet". But be ready to change your mind at next utterance.
No one knows - Anyone predicting anything at the moment is guessing. The future of the stock market in the short term is unknown. No one knows, and any commentator, economist, strategist or adviser who is laying down a firm view is being reckless, they cannot know. But that's OK. Whilst we are kept guessing I think we're doing the right thing, not leaping at first drop and sitting in cash. And we'll remain in cash for now. Until something persuades us that the balance of probability is on the market going up again. At the moment, it is quite literally 50-50. We are "stuck in the box". Caught in the crosswinds of doubt. Waiting for the break. And whether we chase the next break or not will depend on the day. We don't know. No-one does. What I do know is that in the grip of uncertainty, any certainty (on tariffs) will be good for the stock market - good or bad.
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Source: https://marcustoday.com.au/member/webpages/80_view-report.php?guid=f295295e259aad47665e4d17a5a43c8c
Not sure if anything there is actionable TBH. Certainty?! Not this year!
ABC News, 18th March 2025:
US Economy - This Isn't Looking Good
Mohamed El-Erian, an economist who I follow and who I find always explains things clearly, has posted the following 4 charts on X. Bit of a worry!
What I notice is the magnitude of the changes on all graphs over the last couple of weeks.
"From Torsten Slok, Apollo's Chief Economist:
•"[US] Consumer sentiment is declining rapidly both for households making more than $100,000 and less than $100,000 (see the first chart).
•Consumer worries about losing their jobs are at levels normally seen during recessions (see the second chart).
•A record-high share of consumers think business conditions are worsening (see the third chart).
•Households’ income expectations are declining (see the fourth chart).
•Inflation expectations are rising at an unprecedented speed (see the fifth chart).
The bottom line is that consumer sentiment is deteriorating at an alarming rate."
Well, it's not every day you see the NASDAQ drop 4% in a single session. Now down ~10% over the past three weeks, but a deeper dive shows some massive individual declines.
Tesla is perhaps the most striking example -- not only did it lose 15% last night, but it's now down ~55% from its December high. It’s trading like a penny stock.
Meanwhile, here are the declines from recent highs for some major names:
NVIDIA: down 31%
Alphabet, Meta, Amazon, Microsoft: all down ~20%
Even the Dow Jones is off 20% this year
Against this backdrop, Bitcoin’s ~25% pullback hardly seems remarkable. Given its historical volatility, it actually looks resilient.
But here’s what might be an even bigger deal: Japanese bond yields have spiked to GFC levels -- a development that equity markets seem to be underestimating. Japan is a major lender to the world, and higher domestic yields incentivise Japanese investors to re-shore capital, impacting global bond yields, FX rates, and overall liquidity.
Meanwhile, China is dealing with deflation, a collapsing property sector, demographic decline, unsustainable debt and rising trade tensions. (Prices have fallen for two years, marking the longest deflationary period since the 1960s). Deep structural imbalances between investment and consumption remain unresolved and foreign investment has also plummeted.
Trump and his tariffs are wreaking havoc (who would’ve guessed?), as are related policies like DOGE. Geopolitics is about as bearish as you can get, short of outright war.
A big part of the problem, to my mind, is debt - or rather, how it stacks up against global productive capacity.
Global debt hit a record $323 trillion in 2024, pushing the global debt-to-GDP ratio to 326%. Governments alone owe over $100 trillion, or ~93% of global GDP.
This debt isn't being repaid (it never will be) -- it’s being rolled over. And with bond yields spiking, the cost of doing so is rising sharply.
The market is simply being rational. Higher risk demands higher yields. But if the free market can’t absorb this debt at yields governments find acceptable (it can’t), the buyers of last resort (central banks) will step in, as they always do. And that, ultimately, is just money printing.
The powers that be will talk tough but inevitably fold...just as they always do. Stagflation seems like its a decent chance over the coming years, but who really knows?
Still, the world will keep turning. There will always be assets with genuine value that serve as lifeboats against debasement and economic stagnation. And when the liquidity taps are turned back on, we’re likely to see asset inflation take off again -- or, at the very least, cushion the contraction.
Stay solvent, avoid leverage, focus on quality.