The S&P 500 since the start of the year has declined by 5.9%. Over this same time, the Nasdaq has exceeded 10%.
Do I need to buy a dip? Should I sell my bounce?
The answers to these questions depend on whether you trust stock market technical indicators or basics. Anyway, panic and uncertainty is spreading throughout America.
There is a perception that economic growth is receding, consumer prices are rising, and jobs are disappearing. There have also been observations that President Trump’s policies are making the situation worse.
Most people agree that the federal government is too big and dominant. They are well aware of the ramp-delaying scams and waste. They understand that a $2 trillion annual deficit is not sustainable. And the outrageous growth of government debt is a complete disaster.
They also hope that these mistakes will be fixed without any issues. On the day Trump took office, he had an unjust belief that he could magically clean all his waste, reduce the size of the government, and balance his budget without painful consequences. That recognition is shattered.
Moreover, the Trump administration has so far decided to pursue America’s first policy. These policies are extremely destructive. The tariffs and tariff threats create uncertainty.
“Again” how does the trade war affect the prices of imported goods? How does price increases affect spending and investment?
Furthermore, Trump and his cohort don’t care if their MAGA policies will cause a stock market crash or recession. In fact, Treasury Secretary Scott Bessent believes the economy needs a reset after years of growth caused by rising federal spending and asset prices. He said recently CNBC:
“There’s adjustments. I’ll know if there’s any pain.”
This week, stock market investors felt a small crisis. And they didn’t like it.
Unofficial recession
Investors need to adjust their tolerance for pain as the economy adapts to Trump 2.0 and overvalued stocks appear to be no promising. If the Nasdaq drops by 10%, if they cries, how loud will they scream when crashes by 50% or more?
Similarly, in an interview with CNBC, Bessent revealed it “Trump isn’t on the ground.” With these words he ended an implicit agreement with Wall Street, which has been in place since 1987. In an age of panic, the Federal Reserve places elevated beds (i.e. put options) under the stock market distance.
There is also growing evidence that the economy is slowing while stocks are retreating. Both construction spending, international and wholesale, auto sales, and ISM manufacturing and services indexes are falling into fade. All of these data points represent an economy that is decreasing in size.
Gross domestic product for the first quarter of 2025 will not be announced by the Bureau of Economic Analysis until April 30th. However, the latest estimate from the Federal Reserve Bank of Atlanta is gdpnow The forecast shows the first quarter GDP rate of minus 2.4.
But Trump is blind to it. “There’s no recession at all.” he I said on tuesday.
If you want to be technical, Trump is right. Generally, a recession cannot be officially confirmed until a second quarter of a straight negative GDP occurs. So, by the time the National Bureau of Economic Research officially calls, the economy has already been in a recession for at least six months.
In the meantime, the US economy is receding based on current estimates.
Stagflation
Of course, all recessions are part of a healthy economy. Those are the period when mistakes are corrected. If the capital that was accidentally arranged is being redirected. When workers are pushed into more productive employment. And if there is a solid foundation in which new growth can be built.
Still, these benefits do not facilitate a recession. When you lose your job, miss your mortgage payment and get your car back, that’s no joke.
Furthermore, the impact of the recession ranges from individuals to small and medium-sized businesses to businesses. As the economy slows, they all take the lump. And if the contraction is deep enough and sufficient debt is unpaid, the entire financial system can be put at risk.
Remember the mortgage 2008-09 meltdown. Before that was over, the Lehman Brothers, a bank that had been operating before the civil war, had been wiped out from the surface of the earth.
Certainly, recession is a tough one. But it is when consumer prices are escalating that the recession can be particularly tough.
For example, if the economy contracts while consumer prices increase, the outcome is a stag. In this scenario, the disastrous indicators, unemployment and CPI, go through the roof. Losing a job is ruthless every month while having to pay higher prices for basic items.
Sadly, this is the stag. This week, the Bureau of Labor Statistics released its CPI report. According to BLS, CPI has increased 2.8% February of the past 12 months.
Perhaps this is better than June 2022, when CPI peaked at 9.1%. However, with the healing of high CPI levels several years ago, a 2.8% CPI has a combined effect that cannot be ignored.
The truth will win
The idea that all honest accounts have calmed consumer price inflation rates is generally wrong. Prices are still up. They may not have gone up as fast as three years ago. But they’re still up.
More importantly, the yearly price increase is cumulative and compounded. Consumer prices have risen over the past five years measured by CPI twenty three% – From 258.115 in March 2020 to 319.082 in February 2025. If we returned 10 years ago in March 2015, consumer prices would be over 35%.
So adding 2.8% on top of today’s index has a greater compounding effect than 2.8% was done before Covid. And this is based on the government’s own data. Everyone knows that there is much greater price inflation than what is reported during this period.
So the disadvantageous fact of what is happening is:
The economy is in a recession. People are losing their jobs. Trade is slowing down. Consumer prices are rising. The shares are currently retreating. And as Houthi’s continues its path to and from the Suez Canal, it resumes attacks on ships passing through Yemen in the Red Sea.
In some way, all of these things will go well. Adjustments must be made. They cannot stop.
But it is not all fate and darkness. Spring in the Northern Hemisphere takes less than a week. This brings together major league baseball with breeding songbirds, green leaves, warm weather and long daylight.
Similarly, true and honest money, Gold runs another run at $3,000 per ounce.
In the end, the truth will win.
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From the heart,
Mn Gordon
For economic prism
Return from the truth shall prevail over the economic prism
