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Good morning,

The markets took a serious beating this week, folks. I’ve seen my share of volatile weeks in my 20+ years as a trader, but this one had all the makings of a perfect storm. The **S&P 500** dropped 1.5%, the **Dow Jones Industrial Average** fell 1%, and the **Nasdaq Composite** slid 2.6%.

Let’s be honest – this wasn’t just a minor hiccup. What we’re seeing is a market wrestling with fundamental concerns about where the economy is headed. One day up, the next day down – the kind of choppiness that makes even veteran traders like me reach for the antacid.

Tech stocks led the retreat, with heavyweights like **NVIDIA** tumbling 6.8%, **Microsoft** falling 3.2%, and **Amazon** dropping 1.8%. The equal-weighted S&P 500 fell 1.2%, showing this wasn’t just a mega-cap problem. When both market-cap weighted and equal-weighted indices fall in lockstep, that’s a sign of broad market weakness.

What’s driving this pullback? A toxic cocktail of rising inflation, plummeting consumer confidence, and trade war jitters. Let me break it down for you:

* The **Consumer Confidence Index** declined for the fourth consecutive time – a warning pattern we can’t ignore

* The **Expectations Index** hit its lowest point in 12 years at 65.2 – consumers are genuinely worried about what’s coming

* **February’s core PCE price index** (the Fed’s favorite inflation gauge) jumped to 2.8% – well above the Fed’s 2% target

* **Final March University of Michigan Consumer Sentiment** was revised down to 57.0 from the preliminary reading of 57.9

As Warren Buffett once said, “Be fearful when others are greedy, and greedy when others are fearful.” We might be entering a period where that second part becomes relevant. I’ve weathered many market cycles, and the best opportunities often emerge when fear is palpable.

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Four S&P sectors managed gains, while seven sectors posted losses ranging from 0.2% (financials) to 3.7% (technology). The defensive **consumer staples sector** climbed 1.7%, highlighting the risk-off sentiment permeating the market. When investors flock to toothpaste, toilet paper, and soup companies, they’re not exactly brimming with confidence about future growth.

## **Bond Market & Interest Rates**

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The 10-year Treasury yield had quite a ride this week, reflecting the market’s changing inflation and economic expectations. Here’s what happened:

* **Yield spike**: The 10-year Treasury yield jumped to 4.35% after the hotter-than-expected PCE inflation report, up from 4.20% at the start of the week. This marks the highest level since late November.

* **Yield curve steepening**: The spread between 2-year and 10-year Treasury yields widened, suggesting markets are growing concerned about longer-term inflation risks while still pricing in eventual Fed rate cuts.

* **Rate cut expectations fading**: Fed funds futures now show markets pricing in just one rate cut this year, likely in December, down from expectations of three cuts at the beginning of 2025.

* **Corporate bond spreads widening**: Investment-grade and high-yield bond spreads over Treasuries expanded modestly this week, indicating increased credit risk concerns amid economic uncertainty.

* **International bond pressures**: Foreign bonds sold off in sympathy with U.S. Treasuries, with German 10-year Bund yields rising to 2.45% and Japanese Government Bond yields hitting new multi-year highs.

I’ve noticed an interesting trend: many of the market leaders that drove gains earlier this year are now among the biggest laggards. This rotation suggests investors are reassessing risk and repositioning portfolios. Such shifts often occur before more significant market moves.

## **Trump Trading Plan**

The markets are definitely in negative territory, but it will not last for long. Before you get drawn into the media hysteria, consider these:

### **1. Tariffs and Foreign Investment**

Tariffs have been a big focus lately, with the United States threatening or imposing them on nations that have long enjoyed one-sided trade benefits. While this approach often gets labeled as reckless, I see some immediate, tangible effects. Several countries—ranging from Europe to the Middle East—have made substantial foreign investment commitments, **adding up to around $4 trillion.** If these investments **translate into real economic activity, the potential for job creation and growth could be substantial.**

### **2. Energy Independence**

I’m also paying attention to America’s energy production. It’s already climbed to over 12 million barrels per day, and there are projections that it could reach** 14 million by early next year**. Coupled with increased production in other parts of the world, this could stabilize fuel prices, **which in turn helps to ease inflation.** Even a slight dip in energy costs has a ripple effect across the broader economy.

### **3. A New Approach to Border Security**

Immigration enforcement has become a massive talking point, and I’ve noticed that illegal crossings appear to have dropped dramatically. Just weeks ago, **the border was inundated by daily surges of people,** and now the conversation has shifted to finding those with criminal records or standing deportation orders. It’s remarkable how quickly the focus has changed, suggesting that some serious policy shifts have taken hold in a short period.

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### **4. Investigating Fiscal Waste**

Another compelling development is the spotlight on wasteful federal spending. Elon Musk and his team are the only real attempt I have seen in my lifetime to cut the size of government. Will they make mistakes? Yes. **But we can’t continue spending at this rate, and we are very close to the point of no return on our national debt.** I’ve heard estimates that hundreds of millions could be cut right away, and **there’s talk of reaching a trillion dollars in cuts without touching entitlements**. That’s a seismic possibility, and if successful, it would mark a major transformation in how the government handles its finances AND lead to a prosperous America.

### **5. Why Patience Might Pay Off**

Putting all these elements together—tariffs, energy, border security, and spending reform—it seems clear to me that we’re in the early stages of a much bigger shift. **Early signs of “chaos” might actually be part of a deliberate plan that could lead to significant achievements: attracting foreign investments, cutting a trillion dollars in government waste, defusing major international conflicts, and possibly reshaping the country’s economic and geopolitical standing.**

I am not going to tell you what sectors to buy, nor that we have reached the low. However, there may be some **historic opportunities for people to buy and make money** shortly. Now is the time to start planning some trades. **“Buy when there’s blood in the streets, even if the blood is your own”** is attributed to Baron Rothschild.

Have a great week!

Irving Wilkinson, Editor

[AlphaBetaStock.com]([link removed])

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## Week In Review


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## **US Highlights**

1. **Inflation heating up**: Fed’s preferred inflation measure came in hot at 2.8%, exceeding estimates and throwing cold water on hopes for imminent rate cuts. This puts the Fed in a tough spot – they can’t ease with inflation running this hot.

2. **Mixed economic signals**: Despite inflation concerns, economic activity expanded at its fastest pace in three months, with the S&P Composite PMI rising to 53.5 in March. The services sector is carrying the weight, but tariffs and rising labor costs are fueling inflationary pressures.

3. **Personal finance bright spot**: Personal income rose a stronger-than-expected 0.8%, giving consumers more spending power – at least for now. I’m watching to see if this translates to retail sales or gets saved as precautionary cash.

4. **Student loan crisis brewing**: Over 9 million borrowers missed payments after the Covid-era pause ended. Delinquencies now total a staggering $250 billion, with nearly 16% of loans past due. This could become a real drag on consumer spending in coming quarters.

5. **Big Tech pulling back**: Microsoft scrapped major AI data center plans, shelving 2GW of new capacity amid potential oversupply. They’re still targeting $80 billion in capital expenditures this year, but expect slowdown in 2025. When the giants pump the brakes, others typically follow.

6. **Recession warnings flashing**: Consumer confidence hit a 12-year low as future expectations plunged across all age and income groups. The pessimism is remarkably widespread – not a good sign for future spending.

7. **Wall Street getting nervous**: Deutsche Bank now puts recession odds near 50%, while Jeffrey Gundlach pegs them even higher at 50-60%. Their concerns center around market volatility, tariffs, and stagflation risks – a nasty combination I haven’t seen since the 1970s.

8. **Manufacturing adaptation**: Hyundai unveiled a $21 billion U.S. investment plan to dodge tariffs, including a $5.8 billion Louisiana steel plant creating 1,400+ jobs. I’m tracking suppliers that could benefit from this manufacturing reshoring trend – there’s opportunity amid the disruption.

9. **Historical perspective**: Markets have historically delivered positive returns about 75% of the time on an annual basis. During volatile periods like this, keeping this long-term perspective can help prevent panic selling at exactly the wrong time.

## **Global Highlights**

* **Trade war escalation**: President Trump slapped 25% tariff on all auto imports and expanded duties to nations buying Venezuelan oil. “Liberation Day” (April 2) looms large, with reciprocal tariffs expected to be implemented. Markets hate uncertainty, and these tariffs are delivering it in spades.

* **EV market shakeup**: BYD surpassed Tesla with $107 billion in annual sales as China’s EV giant surges ahead on hybrids and battery tech. Tesla’s sales in Europe plunged 43% last month as market share nosedives. The EV landscape is shifting faster than many expected.

* **Eurozone struggling**: Economic activity ticked up slightly in March, with the S&P Composite PMI at 50.4, barely in expansion territory. Weak demand and looming U.S. tariffs weighed on growth despite a rebound in German manufacturing. Europe was already fragile – these tariffs couldn’t come at a worse time.

* **Geopolitical bright spot**: Russia and Ukraine struck a US-brokered truce at sea and agreed to halt energy attacks, marking rare progress toward peace. Trump is pushing for a swift end to the three-year war. Energy markets responded positively, though the broader conflict remains unresolved.

* **Canada feeling the pressure**: GDP stalled after strong growth in January as tariff threats hit confidence. February showed flat output following January’s 0.4% rise, with weakness in retail, oil, and real estate sectors. Their deep economic integration with the U.S. makes them particularly vulnerable.

* **Institutional crypto adoption**: BlackRock launched its first Bitcoin ETP in Europe, expanding crypto offerings beyond the US with listings in Paris, Amsterdam, and Frankfurt. U.S. bitcoin ETFs have already attracted $50 billion in assets. The legitimization of this asset class continues at pace.

* **Tech cold war intensifies**: U.S. blacklisted over 50 Chinese tech firms to curb Beijing’s AI and chip ambitions, targeting entities tied to military use and quantum tech. This escalation has significant implications for global supply chains and tech sector investments.

* **Supply chain realignment**: Companies with flexible supply chains and diversified manufacturing footprints will likely weather these trade storms better than those concentrated in affected regions. I’m advising clients to examine their holdings for such vulnerabilities.


----------## Commodities & Crypto

Oil prices have dropped significantly, with **Brent crude** trading near three-year lows around $70/bbl. The decline stems from growth concerns amid escalating trade tensions and OPEC+ plans to unwind production cuts. Global oil supply reached 103.3 mb/d in February, while the market faces additional uncertainty from proposed U.S. tariffs on Canada and Mexico, which account for roughly 70% of U.S. crude oil imports.

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For energy investors, this price environment presents both challenges and opportunities. On my trading desk, I’ve been watching the disconnect between oil prices and energy stock valuations with interest. Many quality companies are trading at attractive multiples despite the commodity weakness. For those with a longer time horizon, selective accumulation might make sense.

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**Gold** broke above $3,000/oz for the first time in mid-March, as investors flocked to safe-haven assets. Analysts forecast prices could reach $3,070-$3,150 by year-end. **Silver** has outperformed gold in percentage terms, rising 13% year-to-date through March 12, compared to gold’s 11.5% gain.

Having tracked precious metals through multiple market cycles, I’ve observed that gold often acts as a barometer of fear. The current rally suggests deep concerns about economic stability and possibly inflation.

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The crypto market maintains a complex relationship with traditional safe-haven assets. **Bitcoin**, **Litecoin**, and **Monero** have shown strong safe-haven characteristics during periods of economic uncertainty. The broader crypto market continues to be influenced by trade tensions and geopolitical risks.

## Calendar

Next week brings a busy economic calendar, especially for labor market data:

* **Monday, March 31**: Earnings from Loar Holdings, PVH, Progress Software, and TechTarget. I’ll be watching PVH particularly closely for insights into consumer spending patterns.

* **Tuesday, April 1**: February job openings data; nCino earnings. Job openings have been trending down, and further weakness could signal labor market cooling – a key factor for Fed policy.

* **Wednesday, April 2**: March private employment figures; UniFirst, Penguin Solutions, and RH earnings; “Liberation Day” for tariffs. This could be the most consequential day of the week, with both ADP employment data and major trade policy announcements. RH earnings will provide another window into high-end consumer behavior.

* **Thursday, April 3**: Conagra Brands, Acuity Inc., Lamb Weston, MSC Industrial Direct, and Lindsay earnings. Food companies like Conagra and Lamb Weston should offer insights into consumer staples spending and food inflation trends.

* **Friday, April 4**: March nonfarm payrolls report. The consensus expectation is for 175,000 jobs added, but I’m watching for revisions to previous months as well. Wage growth will be scrutinized for inflation implications.

I’ll be watching **April 2 closely—Trump’s self-proclaimed “Liberation Day” could spark significant market volatility depending on the details of his tariff implementation.** Combined with Friday’s jobs report, we’re in for an eventful week.



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