Trump's Tariff Tsunami! Are We Headed for Another Great Depression?!

A Gathering Storm

Here we are observing a peculiar phenomenon in the concrete jungle of Wall Street. The usually cautious creatures of the hedge fund world have shall we say 'flown into a rage'. They've amassed a record number of short bets against stocks. Why you might ask? Because the winds of change or rather the winds of tariffs are blowing fiercely courtesy of President Donald Trump. It appears these financial animals sense a storm brewing a storm that could potentially capsize the good ship 'U.S. Economy'.

Liberation Day or Doomsday?

Goldman Sachs that venerable institution has been diligently recording these market movements since 2010. Their data reveals that fast money professional traders executed their largest ever one day net sales of global equities last week. The trigger? The day after President Trump unleashed his sweeping tariffs. As Tony Pasquariello of Goldman noted this 'Liberation Day' was a rather 'knock down drag out affair'. It seems even the most hardened market hawks were taken aback by the sheer ferocity of the situation. One could say the 'early bird catches the worm' but in this case the early bird caught a tariff!

Echoes of the Past

The whispers of concern have now grown into a chorus of apprehension. Fears are mounting that President Trump has ignited a global trade war a conflict that could drag us all into the depths of a recession. His policies could potentially raise the U.S. tariffs rate to levels unseen since 1910! That's even higher than the infamous Smoot Hawley tariffs of 1930 often cited as a contributing factor to the Great Depression. Are we doomed to repeat history? Only time and the market will tell. Nature after all has a habit of repeating itself as do economic cycles it seems.

A Market Meltdown

The Dow Jones Industrial Average a seemingly unshakeable beast suffered back to back 1,500 point losses last Thursday and Friday. A historic event in its 129 year history. The S & P 500 another market titan plunged a staggering 10% in those two days. Even seasoned market watchers were left gasping muttering 'My word!'. It's a stark reminder that even the most robust ecosystems be they natural or financial are vulnerable to disruption.

Billionaire Warnings

Billionaire investor Stanley Druckenmiller a rare creature indeed emerged from his den to voice his opposition to tariffs above 10%. Meanwhile Leon Cooperman another financial behemoth believes the market bottom is yet to be reached. The chair and CEO of the Omega Family Office even went so far as to call Trump's tariffs a 'mistake' that will likely plunge the U.S. economy into a recession. These are serious pronouncements from individuals who have witnessed the ebb and flow of the market for decades. It seems 'the greatest threat to our planet is the belief that someone else will save it' or in this case steer the economy clear of a recession.

A Flight to Safety?

Nine out of eleven investment sectors in the S & P 500 experienced net selling last week with financials technology and consumer discretionary stocks leading the exodus. The selling in financials occurred at a pace not seen since January 2021 the second fastest on record. As Pasquariello wisely observed 'people are just getting into self protection mode'. It's a primal instinct as old as time itself. When faced with uncertainty the instinct to survive to protect one's own takes over. Even in the heart of Wall Street.