President Donald Trump has been one of the most vocal presidents of our time.
He is on his favorite social media medium almost every day, multiple times a day.
There are many controversial comments he has made. Most are part of a negotiation tactic or shifting the spotlight somewhere else.
In other words, there is a method to the madness.
Other comments give us direct insight into the way he is thinking.
Trump is one of the few supreme powers who have shown they don’t mind steering off the usual presidential path.
Due to his unconventional ways, we have little to base his actions on. But those comments can help us determine what will happen next.
It’s these comments that catch my attention. And one he made in July was the most controversial by far.
I shouldn’t be the only one alarmed by it either. It stands to impact America as a nation.
And it sheds light on something I have wrote about before — that we are on the cusp of the next major recession for the global economy.
Here’s what Trump said…
Playing With the Bank’s Money
“This is the time. You know the expression “we’re playing with the bank’s money,” right? We are up almost 40%.”
He was being interviewed on CNBC discussing his tariffs on goods from China.
The takeaway here is that he views the stock market gains, which were up 31% at the time of that recording, as a tool in his war chest — not a vital lifeline for millions of Americans.
And the stock market isn’t the only thing at play. With tariffs, our economy is on the line as well.
It’s this view that Trump is using “the bank’s money” to fight these wars that has me worried.
Because if you are invested in the market, or have a job, that’s not the bank’s money — it’s yours.
And many Americans are already starting to feel the pressure.
Tariffs Are Having Real-World Implications
The tit-for-tat tariffs we have seen are already raising prices and hindering trade.
The latest numbers show the trade deficit jumped 7.4%. And it’s only going to get worse.
This is the opposite of what Trump is looking for, and it’s likely why he wants to double down on his tariffs on Chinese goods.
Even farmers are under immense pressure as the trade wars get started.
Trump is looking to give them a handout of as much as $12 billion.
Being a Southern boy from a small town in North Carolina, I grew up working in fields and bailing hay before I was old enough to get a job.
And if there’s one thing I know about farmers, it’s that they don’t want a welfare check. They want to earn their pay.
Being in this dilemma is hurting them financially. And, more importantly, it’s hitting their pride.
This is not what I would consider “the bank’s money” at this point.
Tariffs are having real-world implications and affecting people in a serious way.
And we are only at the beginning of what stands to be a long, hard-fought trade war. A war that almost guarantees a global recession is coming.
Prepare for the Next Bear Market
The fact the president doesn’t think he has anything to lose but “the bank’s money” and is willing to risk the profits the market has already seen since he was elected tells us to expect the worse.
Here’s the thing, though: In the short term, tariffs make our economy look good.
Wages will go up because prices are rising, causing inflation to rise. And we will make more stuff temporarily.
But to offset the short-term growth and surge in prices, the Federal Reserve will be forced to move interest rates higher.
Rising rates are ultimately the trigger that slows the economy and reduces spending.
But even as rates rise, don’t expect an immediate plunge in the stock market.
My analysis tells me we have about two years, maybe more, before we enter a major recession and bear market for stocks.
That lines up with the U.S. economy feeling the negative impacts from a trade war about two years from now.
That’s why I have been able to remain extremely bullish during all this talk about tariffs and stock market volatility — they take time to play out.
But when they do, don’t worry. We’ll let you know what’s happening so you’re positioned to take advantage of the next bear market.
Chad Shoop, CMT
Editor, Automatic Profits Alert