sport football: If Tariffs Sink the Market, Here’s What Lifts It Back

If Tariffs Sink the Market, Here's What Lifts It Back

For many Americans, it seems like we're in the middle of an economic crisis.

And I can't blame them…

On April 2, President Trump announced the most sweeping tariff package in history. And it sent a shockwave through global markets.

The administration imposed a universal 10% tariff on nearly every U.S. trading partner starting April 5. And reciprocal tariffs of up to nearly 50% starting April 9.

Since President Trump announced the tariffs, the S&P 500 and Nasdaq both have been down as much as 8% as of this writing.

I'm actually surprised they haven't gone much lower.

After China announced retaliatory tariffs against the United States, I thought we'd see another Black Monday, when $1.7 trillion was vaporized on one day in October 1987.

I know it's hard not to feel fear and uncertainty in times like these. But my primary message to you is this: Don't panic. We've been through this before.

If you were around in 1990, you remember the first Gulf War.

At the time – in terms of global impact – the economic effects of Iraq's invasion of Kuwait were more severe than what we're seeing with Russia and Ukraine.

Oil prices doubled virtually overnight. Interest rates were around 9%. And about a year later, the unemployment rate was nearly double what it is today.

We were still feeling the effects of the Savings and Loan (S&L) Crisis that would end up costing taxpayers over $1 trillion. If you adjust for inflation, that's over $2.4 trillion in today's money.

Just like now, it was painful being an investor in 1990. I know because I was a young executive on Wall Street at the time.

We saw the market crash 20% from its July 1990 high to its October 1990 low. Talk about pain.

I know 1990 seems like a long time ago to many people. But since then, we have seen innumerable busts and panics.

Right before the 1990 market crash, we had the Junk Bond crash of 1989. The S&L Crisis of the late 1980s also bled well into the early '90s.
We had a recession in 1990-1991… The 1994-1995 bond bear market that flattened tech stocks… The 1998 Asia Crisis and Long-Term Capital Management hedge fund blowup.
Of course, we had the dotcom bubble burst in 2000, the Great Financial Crisis in 2008, and the COVID-19 pandemic in 2020… Which was followed by the most aggressive set of Fed rate hikes in history in 2021 that went on to destroy the price of bitcoin and tech stocks.
That was followed by the Ukraine War in 2022 and the regional banking crisis of March 2023.

And yet, amid all that uncertainty, great assets resumed going higher after the uncertainty cleared. Since 1990, the S&P 500 is up 1,377%. The Nasdaq is up 7,716%. And since the lows of 2022, bitcoin is up 417%.

Living through all that volatility has taught me great assets always come back. So, you must hold onto your great assets and add to them during a crisis.

That's why when the proverbial spaghetti hits the fan, instead of hiding, I look for opportunity. And you should, too. Because that's how you get really rich.

Cranking Up the Money Printers

Ever since the turn of the century, whenever the market crashes, the Federal Reserve comes to the rescue. And when the Fed lowers rates, it's rocket fuel for riskier assets like tech stocks and cryptocurrencies.

We saw this after 2008 when the Fed slashed its key interest rate to zero and pumped $3.6 trillion into the economy during the Great Financial Crisis.

The stimulus sent the markets 133% higher over the following six years.

In response to the COVID outbreak in 2020, the Fed again slashed its key lending rates to zero and dropped another $4.6 trillion worth of helicopter money on the economy.

The market rallied 101% over the next two years.

After each of these crises, markets recovered and rallied to new highs. Of them, the one that's most similar to the situation we're going through now is the pandemic.

Just think about it…

With the stroke of a pen, President Trump has thrown a monkey wrench into the global trade machine – slowing it down dramatically under the weight of double-digit tariffs.

Think of it as "Lockdown Lite." Company bankruptcy filings are already nearing their COVID highs of 2020. And consumer credit card debt recently made a new record high of $1.21 trillion.

Businesses and consumers were already on the edge. The disruption of global trade might just push them over into a recession.

If that happens, we'll likely see the Fed rush to the rescue again.

Now, I don't think we'll see direct stimulus payments in the event of an economic recession like we did during the pandemic. You won't get so-called "stimmy" checks.

But you will get a more accommodative Fed. That means lower interest rates. And if liquidity is the fuel of the markets, lower interest rates are the ignition switch.

Let me explain…

Every institution has rules that govern how and when they'll allocate capital to equities. They use financial models that change the allocation based on prevailing interest rates.

The 10-year U.S. Treasury rate – the "risk-free" rate – is typically what they choose.

If that rate of return is higher, they'll move away from what they see as high-risk investments – things like bitcoin and high-growth tech stocks.

Instead, they'll move into safe blue-chips with earnings, predictable cash flows, dividends, and inflation protection.

Rate cuts are bullish for risk assets like growth stocks and cryptocurrencies because they act like a release valve.

When rates are high, money freezes up, and it slows the economy. But when rates are low, dollars flood the system as borrowing increases. This boosts the economy.

In short, lower rates translate to more money in the system. And that will likely lead to higher asset prices.

The Best Hedge Is Bitcoin

Friends, I know it's hard watching your equity melt on paper. Right now, I believe the best protection against that erosion of capital is bitcoin.

You can't impose tariffs on bitcoin. And bitcoin is unconnected to world trade. Once the market awakens to that idea, I believe we'll see a flight to safety in bitcoin.

Now, I won't sugarcoat things. It's highly likely there is more volatility ahead.

I said the same thing during the pandemic, and my advice was the same: Stay the course with what you have and buy bitcoin on weakness.

Because if tariffs end up iceberging the U.S. economy, it's a very safe bet that the Fed will cut rates and flood the market with money.

In the interim, we just have to let the tariff drama play out because if the President changes his mind, we could see stocks zoom higher.

Just look at what happened on Monday morning.

On just the rumor of the administration placing a 90-day pause on tariffs, the S&P 500 rose 9% from its intraday bottom. That's over $4.5 trillion in value that came back into the S&P 500 on a rumor.

To me, that says the market wants to own stocks. It just wants some clarity.

Exactly when will that happen? Who knows? I certainly don't, and I don't need to.

All I need to know is that, at some point, we may see a deal. And if not – and we careen into a recession – then the Fed will be there to flood our markets with cheap money.

The sun will shine again. And probably far sooner than you currently believe.

So, if it makes financial sense to you, I urge you to view this pullback as an opportunity to buy more bitcoin. Don't confuse what we're seeing with a permanent erosion of capital.

Enjoy your life, enjoy your children, enjoy your grandchildren.

Let the Game Come to You!

Big T