How much do you need? It’s down 15% since the inauguration. Meanwhile the dollar is at a 3-yr low vs just about all foreign currencies having lost more than 10% vs EUR.
All that from an economy that was humming along fine 3 months ago. If that’s the winning we were going to be sick of, I’m ready to be done with it.
It’s ironic that they claimed the economy was terrible, even though it wasn’t, and they made it worse by crashing the market and the dollar and significantly increasing the chance of a recession.
So now THEY did it… any suggestions?
I admit that the market was better 3 months ago. So far my losses are bad but still within the gains I made.
I’m holding on!
The United States is running a budget deficit of about $2 trillion per year with a total debt of about $35 trillion. We are also running a trade deficit of about $1.5 trillion per year in 2025. Any economy can “hum along” on borrowed money
You keep referencing the trade deficit, but you have yet to show why it’s a problem.
Yes, and is anybody doing anything about it? They’re adding a sales tax in the form of tariffs, and will probably give a tax cut to the rich. This will not have a positive effect on either the deficit or the debt.
Agreed that it is not sustainable which is why I don’t mind looking at cutting government spending. I can agree or disagree on specific cuts but that thinking is fine with me as long as everything gets looked at evenly. Seems mind-boggling to me that the $1T/yr defense budget gets rubber-stamped without going through Doge shredder.
But the tariff tax will not help the budget deficit if it’s used as an excuse to keep or add other deficit-inducing tax cuts. Especially considering that if the tariffs were successful in shifting production back to the US, the tariff revenues would gradually decrease. If we wanted to replace a portion of income tax by a consumption tax, let’s be honest about it and make it a Federal VAT. At least, that would not affect trade and markets as much and its revenues would not decrease over time.
I increased my share of international stocks earlier this year. There were other reasons, but I figured it would soften FX effects at least.
It’s not a bubble for SPY, thoughtful historical comparisons
On the other hand, in small/mid cap unprofitable junk stocks, let’s go!
I’m so happy he’s blogging again. I’ve appreciated his insights over the years.
I don’t dispute some arguments that this time it’s really different. But I’m a bit skeptical of the part of the analysis based on 4% real GDP being reliable (was -0.6% in Q1 and magically at 3.8% in Q2?) enough to support an accurate determination of reasonable PEs. If you assume the fluctuations between -0.6% and +3.8% were tariff-induced around a mean of +2.2%, analysis is quite a bit different.
But the earning yield gap argument feels a bit more solid to me. At end of Q2, it was -0.69% (0.45 std dev. from historical average of 0.26%). It should be around -0.4% now so still makes equities a bit overvalued but not crazy compared to historic levels for bubbles.
