Imagine that you’re Trump.
What’s the song you’re singing in your head every time before you announce a new set of tariffs.
Is it the Stones’ “I Can’t Get No Satisfaction”?
Or perhaps Springsteen’s “Born In The U.S.A.”…
His demeanor is so casual that I wonder if maybe what he’s humming to himself, “Oops… I did it again” by Britney Spears.
Whatever your opinion of Trump, he keeps his promises. You’ve got to give him that.
Investors, however, see it differently.
The latest tariffs targeting Argentina and Brazil took the stock market by surprise on Monday.
The news resulted in the largest single-day decline of the S&P 500 in two months.
This type of reaction was unexpected, given the stellar November performance. Over the last month, we saw the Index reaching new all-time highs almost every week.
But what was most unusual about these tariffs was that these two South American countries together represent only about 3% of the world GDP.
Meaning the market’s sharp correction was unreasonable.
Could the stock market be signaling something else?
That maybe the economy isn’t as healthy as imagined…
And that maybe the Phase One trade deal we all took for granted is far from certain.
In which case we might be looking at another December stock market crash, such as the one we suffered last year when the S&P 500 declined by 9.18%.
Will the stock market be the Grinch this holiday season… or Santa Claus?
Let’s find out.
The Trade War Intensifies Once Again
Let’s start with the hottest issue—the tariffs.
The primary reason for the market’s recent stellar performance was the so-called Phase One trade deal.
Under the agreement, China was to offer a concession on intellectual property and promise to meet a certain agricultural purchase quota.
The United States, on the other hand, would roll back some of the tariffs.
However, the two sides were supposed to sign the agreement by the end of November.
Instead, nothing happened.
Now doubts are emerging as to whether an agreement to end the tariffs is possible at all, especially after the latest spat over the Hong Kong Human Rights and Democracy Act.
This also means that an additional 15% tariff increase on about $156 million of Chinese goods scheduled for Dec. 15 will inevitably happen.
I expect the market’s reaction to be the same as it has been to previous rounds of tariffs—a decline.
The question is, will it be enough to stop the longest U.S. economic expansion in history and trigger a recession?
Buy-The-Dip Opportunity Straight Ahead
Every time Trump has initiated a new round of tariffs, stock values have fallen.
However, in each case, rebounded and went on to reach new highs.
I believe there’s a high probability this will happen again.
The latest figures show that both the Chinese and the U.S. economies are in far better condition than previously thought.
Moreover, the manufacturing sector, which was hardest hit by the tariffs, is rebounding in both countries.
And the reason for this has nothing to do with U.S.-China negotiations…
It has to do rather with central banks’ support.
Both the People’s Bank Of China (PBOC) and the Fed are pumping massive amounts of liquidity into their respective economies.
I have reminded you before why this is the single most important economic indicator, and we are seeing it in action again.
Which means there’s only one thing for you to do.
Wait for the sell-off to happen after Dec. 15, then go all-in on stocks when they rebound.
Don’t worry. I’ll be sure to remind you when to act.