Hours before President Trump suspends the global tariff war on Wednesday, he had a message to investors on social media.
He was right – news of a suspension on mutual tariffs soared the Dow that day nearly 3,000 points. But a day later, a third of these profits were wiped out, with 10% levied remaining around the world, and the fear of a global recession continued.
So, what about now? Is it the best time to buy or sell?
As readers of this column know, Wall Street executives and money managers have signalled weeks that Trump will ultimately try to cut trade deals.
They said that market pressure, particularly from the very important bond market, will be a catalyst for his U-turn, as global bond buyers dislike the uncertainty of the tariff war and acknowledge that they will buy debts that fund the government.
They also predicted that Trump would eventually leaned over his Hawkish advisor, Peter Navarro and Commerce Secretary Howard Lutnick, and leaning against his highly capable Treasury Secretary Scott Bescent.
This is what they are telling me now. With all of the initial enthusiasm for a trade pause, there is a key fundamental issue that hasn't disappeared so quickly in this market. So there was a big pullback on Thursday after the rally on Wednesday. Yes, there are some stocks of great companies that have been beaten by tariff tantrums that look cheap, but overall the market appears to be overvalued.
To support their paper, these investors have recently called attention to a well-known investor named George Soros, who has been found to be a crude social activist. Soros explained his theory about the gaming market in his groundbreaking book, “Financial Alchemy, Reading the Minds of the Market.”
It should be noted that on the way to trade billions of global stocks, currencies and goods, President Trump hired a man who retreated from his tariff stance. So perhaps Bessent agrees that my sources say they use Soros as a guide to the current market. As Soros writes, the underlying cracks of the market remain dormant until events crystallize market imbalances.
This event could be anything: terrorist attacks, government shutdowns, tariff wars, but this event means that it's slightly less than the underlying cracks to trade herds up and down.
Trump's tariff suspension may provide short-term relief to market worries about the perceived impact of the trade war on corporate revenue and stock prices, but it actually doesn't address most of the remaining cracks.
Even before tariffs, stocks appeared to be overvalued by traditional measures, such as a 12-month price return rate, far above the historic average. The US sold large amounts of debt to foreigners who take away the economy that invested money, and sent money abroad in essentially the form of interest.
Yes, say what you want about Trump's Sledgehammer trade approach. However, he inherited those fundamental concerns. It's no coincidence that Tuesday's bond market route appears to be the catalyst for Trump's decision to press the pause button.
None of these underlying issues have disappeared anytime soon, unless another market disappoints, which disrupts the valuation. If Trump's tax cuts and deregulation drive significant economic growth and pays $36 trillion in borrowing, that's great.
However, for now, buyers should be careful.
