A Glimmer of Hope
Author: Greg Valliere
April 7, 2025
IT’S TOO EARLY TO HOPE FOR A SIGNIFICANT RALLY, but the ugly market selloff soon may run out of steam, thanks to five crucial developments that could help establish a floor for battered investors.
HERE ARE SOME SIGNS OF HOPE:
1. REPULICANS WANT THIS TO END: There’s a palpable sense of fear among Republicans on Capitol Hill who worry that the market crash could cost them the House and even the Senate in the 2026 elections.
Watch Ted Cruz, the Texas firebrand senator who adamantly opposes tariffs, which he views — correctly — as taxes. Cruz has a safe seat for nearly six years, and if he attracts other GOP senators, Cruz could become a major anti-tax albatross for Trump.
2. TRUMP OR SURROGATES will begin to negotiate. The first sign of movement came this weekend when Vietnam said it would like to deal; bigger countries are whispering that they also want to negotiate — and Trump will listen.
3. STIMULUS IS COMING: It’s a given that the Federal Reserve will cut rates, probably not as soon as in May but most likely by summer. And fiscal stimulus is also coming — in a massive tax bill that will come into focus this summer or earlier.
4. DEFLATION IS COMING: All of the hysteria over inflation may be exaggerated, in our opinion. The likelihood of market uncertainty and reluctant consumers could bring a bout of disinflation, in our opinion. The price of oil in recent days may be a hint.
5. NO RECESSION: Despite handwringing about a recession, modest growth may persist. It’s difficult to see a recession with 4% unemployment and trillions in monetary and fiscal stimulus coming this summer.
BOTTOM LINE: We think trade wars may persist for many more months, but at some point, the markets may run out of sellers and Republicans will tell Trump to wrap up the tariff war. Another election is always just around the corner, and suddenly the Republicans are looking vulnerable in the next one.
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