By Graham Summers, MBA | Chief Market Strategist
Today is “liberation day” according to the Trump administration.
President Trump believes that introducing tariffs against the U.S.’s trading partners will make things “fair” and stop the U.S. from being “ripped off.” Some Trump insiders have even gone so far as to claim that the U.S. will make so much money from the tariffs that it will be able to stop foisting income tax on its citizens.
Will this prove to be correct? I have no idea. What IS clear is that the trade wars have done SEVERE damage to the stock market. And likely triggered a recession in the process.
This below chart of the S&P 500 speaks for itself. The bull market trendline (blue line) has been destroyed. Even worse, stocks have taken out critical support (the green line) which is now acting as overhead resistance.
In simple terms, this is about as UGLY as a chart can get. There is NOTHING bullish about this.
Moreover, this is happening at a time when the U.S. economic data is SCREAMING recession.
The ISM Manufacturing Survey is a survey of managers at 400 different industrial companies located throughout the United States. It’s one of the most important economic data points there is as it represents the closest thing to a real-world measure of what’s happening on the frontlines of the economy.
The latest ISM Manufacturing Survey was ABYSMAL.
The survey reading fell to 49, which is a RECESSIONARY reading. New orders, which measure NEW business COLLAPSED to 45, which is DEEP into recessionary territory.
And worst of all, Prices Paid, which measures the prices firms are paying for goods and services RIPPED higher to 69. This is WAY above expectations of 62 and suggests that inflation is in fact ROARING back into the economy.
Add if all up, and this survey is SCREAMING “INFLATIONARY RECESSION.”
That is SERIOUSLY bad news. When recessions hit, the average stock market decline is 30%. This would mean that the recent bloodbath in the stock market isn’t even HALF of what we can expect to unfold.
A 30% decline for stocks brings the S&P 500 down to the lows 4,300s!
