Ahead of tonight’s State of the Union address, we need to remember that inflation is still the number one enemy of the American people, and the most significant barrier to a genuine economic reset that allows for a chance of authentically shared prosperity.

The main message from the presidential election was that inflation had wrecked the average American consumer.

It should not have been a surprise, but political pundits on the left only pivoted to the topic late in the campaign, pointing their finger at businesses.

Wall Street also missed it, joining the mainstream and financial media, cheering “strong” nominal economic data and ironically ignoring Milton Freidman's observations.

During COVID-19, the Federal Reserve wasn’t the only source of money created out of thin air.

President Trump helped offset the pain of a worldwide economic shutdown.

Congress delayed his last stimulus round, which landed in Biden’s lap. Nevertheless, his administration pushed through another $1.9 trillion in stimulus and, after that, an assortment of spending plans.

These programs kept the spigots gushing money, which has kept inflation growth uncomfortably elevated.

Over the weekend, Anna Wong made observations of those programs.

When a River of Cash Dries Up

Media Firestorm

Of course, this is not how the scenario is playing out in the media, which is working overtime to scare everyone over tariffs.

I did a back-of-the-envelope count of horror stories that accompanied Biden’s “stimulus” and Trump’s tariffs.  It's not scientific, but I’m pretty sure it's spot on.

Media Financial Horror Stories	Count
Biden’s ‘Endless Stimulus Spending’	NA
Trump’s ‘Tariffs’	Gazillion

Let’s see what’s happening in real-time, vis-a-vie, with those insidious tariffs.

New orders plunged, and inventories remained in contraction in the February ISM manufacturing report.  

Meanwhile, the notion that it's so easy to pass on prices to consumers defies common sense, as underscored by personal income and spending data for January.

Back to the notion of an economic reset.

The Federal Reserve was supposed to curb demand, but instead, it made an already bifurcated economy more unbalanced. The wealthiest are doing half the buying.

Once they slow down, and there are signs it has begun, total inflation can slow and maybe pull back to the trendline.

Initially, that might look like stagflation.

Initially it may hurt the stock market which is a point Scott Bessent continues to bring up: “Over the medium term, which is what we’re focused on, it’s a focus on Main Street. Wall Street’s done great, Wall Street can continue to do fine, but we have a focus on small business and consumers. We are going to rebalance the economy.” 

-Scott Bessent

The Stock Market

Lately, everything has moved in the right direction for the stock market, except for the stock market itself.

Sometimes the Wall of Worry can be slippery.

The S&P 500 has entered its 30^th correction since the March 2009 low.

A reminder that the March 2009 low was 676, and right now the S&P 500 is at 5,760.

This downdraft is also quickly changing the debate over valuations, as there are far fewer nose-bleed forward PE ratios.

The market is oversold, and we are licking our chops.

Even if this is your first rodeo, don’t act like it’s your first rodeo, take a hit then walk away.

This is the time to have eyes wide open and heads out of the sand.

Comments

Media Financial Horror Stories, Trump’s Tariffs, Count: Gazillion. This sums up what my 96-year-old mother watches on TV all day and all night. She is petrified. We are not. Thanks, CP Tim in Texas on 3/4/2025 1:38:07 PM

Excellent analysis in your afternoon report today Charles! It's a good reminder to us on how good you are at what you do.....thank you. Bob Cayia on 3/4/2025 4:05:05 PM

Tweet

 

Home | Products & Services | Education | In The Media | Help | About Us | Disclaimer | Privacy Policy | Terms of Use | All Rights Reserved.