🗞 Big Macro Energy

WHILE YOU POUR THE JOE… ☕️
Tariff Man is Back

Trump just announced Tuesday that he will be raising tariffs 📈 on all our main trading partners, that’s:

• China

• Canada

• Mexico

That would mean, in theory, that we’re about to see higher prices ahead, but that’s not necessarily what could happen here. Here’s the reason why.

These tariffs will be implemented to deter immigration policies and other trade agreements that are not beneficial to the United States.

Trust me, it hurts them more than it hurts us (maybe not the case for China 100%, but for the others at least).

Once they feel the heat and convene to give Trump the terms he wants, it’ll likely be smooth sailing from there, and tariffs will be removed.

Markets, especially gold, oil, and bonds, are not reacting to the news in a way that would signal an inflation resurgence, either.

Speaking of market price action, let’s get on with today’s email 📧…

TURNING THE PAGE
Shifting Narrative

The broader market is now shifting away from its previous inflation narrative and down into an outright recession scenario 📉. That would spark fear in most people, but not you.

Why?

Because you’re ready to trade the market no matter which direction it decides to take in the coming weeks, especially if you’ve been following our nightly market recaps on Twitter.

Anyway, let me break down the possible scenarios here so that it’s easier to follow later:

1. Recession: Bonds $TLT up, $GLD gold down, $DXY dollar flat or up, $OIL crude flat or down.

2. Inflation: Bonds $TLT down, $GLD Gold up, $DXY dollar flat or down, $OIL crude up.

The third scenario would be a soft landing, but we haven’t seen the price action to support it in months, so we’re just going to dismiss it right now.

Moving on

Until last week 📆, the market had been telling us that the economy might have been headed into an inflation scenario, so we started buying Bitcoin at $84,000, Gold at $2640, Oil at $68.5, and other related stocks.

Now, the story has changed, and the narrative reflects a potential recession leading us to sell and even short what we had previously bought; here’s why:

Look at bond yields. It might not seem like much of a move, but it did make a dent in the price of the bonds ETF enough to get us thinking.

Why are bond yields coming down? We’re willing to bet that it’s because of the wrong reasons.

It’s not the Fed rate cuts, and it’s not because we’re getting a “soft landing”; it’s because of a risk-off and flight-to-safety attitude. 👀 

But

We can’t come to this conclusion from bonds alone, we have to look at other markets here..

Gold is an inflation-related asset that can’t be as easily manipulated as currency and other instruments.

Notice that the price turned sharply to the downside after the $2700 profit target we gave you. Keeping the two scenarios we provided in mind, what do you think this means?

Spoiler: It’s not inflation.

The gold prices coming down give momentum to the risk-off attitude 📉 we just mentioned in bonds, and based on everything else we think this does have recession at its heart.

What about stagflation? Yeah, what about it?

That was going to be our assumption for a while, based on how oil prices broke above $71.5, only to be met with responsive sellers.

When bonds go up, gold goes down, and oil sees such a sharp reversal, trust me, it only means one thing.

And that thing is recession. We’re so far away from a soft landing, but we still have one foot on inflation as long as gold and bonds stop their current trajectory, so we’ll have to see where those go.

Even the small-cap stocks are proving this is the case through the Russell 2000 index.

Being down for the week next to the S&P 500 and NASDAQ is one thing; seeing that sharp reversal right around the same time bonds rallied and gold/oil sold off is clear.

Small-cap stocks don’t have the same ability to diversify their costs or headwinds in international markets as large-cap stocks, which is why the headwinds of a potential inflation narrative are starting to hit the space now.

All told, there is one difference maker out there we need to talk about, the dollar. 💵 

This brings me back to the United Kingdom and the British Pound in the 1990s when the government kept the currency artificially high to save face.

The economy was thrown into a recession by this strong currency, and we think the same thing could happen in the United States today.

If we keep seeing a strong dollar, a strong refusal to break below the $106 support, then the price action in these other asset classes will be proven right.

Should the dollar break below, then we will see different movements in these other asset classes, calling away from the recession theme and into an inflation one once more. ✅ 

 TRADE OF THE WEEK
Spark it up

Ben if you’re reading this, I have as much PTSD on this as you do.

CleanSpark stock was a name that cost me and a good friend a lot of headaches back in 2021. We bought the stock knowing that Bitcoin and cryptocurrency mania would boost its valuation to crazy highs.

That it did. We bought close to $8 a share and rode it all the way up to $40, only to see it crash a couple of weeks later.

Well, lesson learned.

This time, though, I think we can redeem ourselves based on how companies like MicroStrategy have rallied, all because of the amount of Bitcoin they hold in their balance sheets. 📈 

Particularly for CleanSpark, a $13 a-share closing price represents a good entry for a low-volume cutoff here.

Looking at the stock's market profile, it becomes evident that $13 represents a low-volume area that could act as a potential turnaround for the name, giving it enough momentum to see its way back to the $17 level (red bar for VPOC).

That sounds like a good technical setup, but what will it take to get there?

Well, good earnings results, which come out shortly.

Not only results but also bullish guidance from management, considering the company just keeps on buying and mining more Bitcoin to store on its balance sheet.

Wall Street analysts also see the upside potential from this event, knowing that the market is becoming more aware of the hype in Bitcoin and Bitcoin-related companies and laterals.

There you are, with 65% upside potential 🔥 if management gives the right guidance moving forward or if the balance sheet has more Bitcoin than investors expect.

NOW GO AND MAKE IT HAPPEN
Connect Your Own Dots

Today’s book recommendation 📖 discusses the little mega computer we all carry around in our heads. It’s a great source for getting down to the point of how we learn and store information.

From these lessons, you can learn new techniques to apply in your life and business. Know yourself.

To your success,

G. 🥃