Market Madness – Top Seeds Eliminated

Market Madness trumps March Madness for now. Here is a recap of the latest action…

FIRST ROUND SURPRISES 

Stocks: Some are surprised at this; some are not. The major averages are down 11-12% over the past two days alone. That might not seem so bad, but generally, investors were likely not expecting another bath at this time. The loss was especially hurtful for the tech-heavy NASDAQ. Cumulative losses for the volatile index since mid-February are -23%.

Silver tossed in the towel early, losing more than $5 oz. (-14%) since its recent peak price early Wednesday morning. The white metal was never in the game and closed near its lows on both days. Silver’s historical performance serves as a precedent for its failure again this time. It makes a lot of noise, but doesn’t follow through. Nevertheless, the latest pop and fizzle is still shocking.

Gold Miners parted ways with gold immediately, confirming once again that they are not a good alternative for the yellow metal itself. Two-day losses for gold mining shares were approximately the same as for stocks in general, down close to 12%.

THE WINNERS 

Gold managed to stay above $3100 oz. on Thursday, rallying initially, then declining afterwards. Thursday’s loss was less than 1%, which was surprisingly strong with almost everything else cratering around it. On Friday, however, gold succumbed to selling pressure, losing almost $80 oz. The gold price total loss for the two days was less than 4%. Rather than call gold a winner at this point, let’s refer to it as a survivor.

U.S. Treasury Bonds –  the big winner, both relatively speaking (compared to everything else) and in absolute terms. Bond prices began rising sharply as early as Monday afternoon and finished the week with peak prices up 4% around mid-day on Friday.

TERROR OVER TARIFFS – CONCLUSION

Right now, the markets are acting scared over what might or might not happen regarding tariffs and reciprocal tariffs. If tariffs were the only issue, things wouldn’t be so precarious. There are other issues, though.

The economy has continued to weaken at a perceptible rate. The slowdown in economic activity and the threat of recession (or worse) were evident before tariffs became a headline issue.  Tariffs might be just a trigger that ushers in a raft of pending bad news.

Also, it is probably true that the markets were ripe for a significant sell-off anyway. The question is whether tariffs will help or hurt  prospects for turning things around in positive fashion.

Trump argues that tariffs are the way to go. He is wrong. The history of tariffs and their effects on international trade and the economy are disastrous.

Tariffs are self-inflicted wounds. Shooting yourself in the foot while claiming that you are “leveling the playing field” makes no sense.

In the meantime, the longer this goes on, the deeper the hole those in control dig for the rest of us.  Stay away from the edge; the deep hole is fast becoming a bottomless pit. (see A Comprehensive Overview Of Tariffs and Prices To The Tariff Circus Continue To Rise )

Kelsey Williams is the author of two books: INFLATION, WHAT IT IS, WHAT IT ISN’T, AND WHO’S RESPONSIBLE FOR IT and ALL HAIL THE FED

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