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The stock market fell dramatically after President Trump announced a wide -ranging tariff on April 2. The “Liberation Day” announcement included the tariff rates higher than expected, forcing investors to reset expectations for the American economy and companies’ profits.
Looking at modern data, the potential slowdown in the American economy may be already ongoing, and the risks that the customs tariff can lead us to the frank stagnation, with long shadows on stocks, given that the evaluation of stock prices significantly determines future expectations for revenue and profit.
Related: The billionaire Michael Bloomberg sends an arduous message about the economy
Historically, the sharp sales as we witnessed in the S&P 500 and Nasdaq Composite, which decreased by 17 % and 22 % in early April 4, respectively, from their highest levels in January, creates opportunities for investors who bear the risk “to buy The Dip”.
The capabilities that attract investors in hunting have caught the attention of Bill Gross, the veteran director of Wall Street. Gross has been moving in the market since 1971, and has participated in the establishment of Pacific Management Man, or Pimco, a huge company of $ 2 trillion under management. It was previously running more than $ 270 billion through the total return fund in Pimco, and was won by the title “Bond King” before moving to the Janus Henderson investors from 2014 to 2019.
Gross has seen a lot throughout his 50 -year career, and presented a sharp message about the stock market this week.
Is the federal reserve behind the curve again?
The Federal Reserve has a double mandate to target inflation and low unemployment, and often two violating goals can leave the federal reserve behind the curve when it comes to transforming monetary policy.
For example, raising interest rates slows the economic activity and enlarges disgraceful. However, it also leads to the demobilization of workers, which we are currently facing.
Related: Jim Kramer provides one luxurious reaction to a 20 % tariff
After incorrectly expected in 2021 that inflation would be transient, Federal Reserve Chairman Jerome Powell eventually operated the highly bound and worrying interest rates since the Chairman of the Board of Directors resisted at that time Paul Volker inflation in the early 1980s.
However, delaying the battle of inflation contributed 8 % in 2022. While inflation has declined since then, it is cumulative, so the damage associated with the frequency is still perceived.
Paying the weak labor market, which is partially caused by the high maintenance rates of economic activity to the Federal Reserve to reduce prices in the fourth quarter. However, inflation increased to 2.8 % in February from 2.4 % in September, which led to the real -reserve of the federal reserve to more cuts.
Unfortunately, temporary suspension did not help revive job growth. According to the work statistics office, the unemployment rate in February was 4.2 %, an increase of 3.5 % in 2023.
275,000 Americans lost their jobs in March, according to Challenger, Gray, and Christmas, partly due to discounts for the Ministry of Governmental efficiency (DOGE). The number of workers’ layoffs grew by 205 % on an annual basis. This was the largest month of demobilization since Covid discouraged the economy in 2020.
What is happening next to the economy is uncertain, but the increased unemployment and the reinforced inflation is not a great recipe. Moreover, President Trump risks a tariff that feeds the inflation fire, and given that consumers have already been pressured by cash, it may cause companies ’profit and profit growth.
Bill Total throws cold water on a “purchase” talism
The Wall Street experience for a long time from Bill Gross means that he saw many fixed organic pollutants in the market and drops, including NIFTY 50, the apostasy in the 1970s, the S&L crisis in the late eighties and early nineties, the internet and statue, the great stagnation, Covid, and 2002 Bear Market.
In short, Gross was around the mass, making its markets on the markets this week especially worrying.
Related: Official expectations in the federal reserve on the American economy amid tariff disorders
“Investors should not try to capture a falling knife,” Total Books Frankly in an email to Bloomberg.
The Dip purchase in S&P 500 was historically profitable, but the pain that you bear while you find the arrows may be difficult to carry its bottom. It may take years to restore losses. The situation is worse for individual stocks, which may never return to its highest levels (for example: CISCO systems ((Csco)) It is still trading without its peak 1999).
Gross said: “This is an economic event and an epic market similar to 1971 and the end of the golden standard except with the immediate negative consequences.”
In the early seventies of the last century, a group of 50 pioneers in stocks became “one decision” – only purchase. The funds were focused inside, which led to a significant decrease in the market when it reached its climax in 1972. Is the sound familiar?
It is somewhat clear what will happen next. The President of the Federal Reserve Powell admitted that he believed that the effect of customs tariffs would be worse than he was previously expected, and perhaps creating price cuts again. Meanwhile, President Trump is facing Al -Atheer to pressure Powell to reduce prices – a strategy that has not succeeded in the past.
Perhaps the last market decrease will encourage negotiations that decrease the definitions, which reduces their impact. But it remains to see, and the total is not convinced.
Gross said: “Trump cannot be tramp any time soon,” said Gross. “It is more than that.”
Related: The Veteran Fund Director reveals the prediction of the S&P 500
