Three things I’m thinking about today…

1. In markets, there’s a concept called ‘retesting the low’….

…and the question for you, me and everyone else is whether this current rally fizzles out and we go down again.

I remember back in Covid the burning question was the same. Would the market go back down after that epic fall into March 2020?

As it so happens, the market didn’t. It ripped back and kept going.

But in the 2022 slump we did go down again. You can see that circled here…

Which is it going to be this year: more like 2020 or 2022?

Truth be told, your guess is as good as mine. But I’m leaning towards a 2022 type scenario right now.

Back in 2020 the central banks were behind the market all the way. Not so this time.

2. Plus we have Trump, the USA’s Bullshitter-in-Chief, confusing everyone.

One day tariffs are on. Then delayed. Then some things are exempted. But they’re not.

Frankly, no one’s got a clue, nor what next bit of gibberish will spew forth.

And just to give you some more confidence, Elon Musk referred to Trump’s trade advisor as a “moron” and “dumber than a sack of bricks”.

And what about China in all of this?

If I’m going to listen to anyone on China, Arthur Kroeber is that guy.

Arthur’s life’s work for the last 20 years is researching China. His firm Gavekal is a key player over there for Westerners looking for the inside take on what’s happening.

I have his 2016 book on China on my bookshelf somewhere.

Arthur pops up in the Australian Financial Review today, saying that China is well placed to weather the current tariff spat.

Why is that?

He says that China can redirect her lost export sales to the US to feed domestic consumption.

Arthur also calls bullshit on all the reasons bandied about for Trump’s tariff war.

Check it…

“The usual claims – that he wants to crack down on unfair trade practices, eliminate trade deficits, reindustrialise America, confront China – do not hold up. Trump often invokes these goals.

“But these stated aims often contradict each other, are contradicted by other policies or are obviously unachievable.

“A better explanation is that Trump is motivated mainly by a desire to accumulate and exercise power, and tariffs are the best instrument of that power.”

Makes sense to me. In other words, we have an egomaniac in charge of the White (Frat) House, most likely surrounded by yes men and arse kissers.

What to do in such a scenario? Expect things to stay volatile and investor confidence wobbly.

We also don’t know whether the recent bond and stock sell offs have left some big players exposed and bleeding behind the scenes.

However, keep the long term in mind, too. Donald Trump is not a chess master.

He’s more like a one trick pony. His end game is to cut taxes.

The tariffs are revenue cover for what he wants to do without spooking the deficit hawks.

Here’s former Business Council of Australia chief executive Jennifer Westacott in The Australian…

“Donald Trump will lower the corporate tax rate to 15 per cent. He will get that done. He got it done last time down to 21 per cent. The economy really took off.

“Investment will flow back into the United States because if you’re a company and you’ve got duties to your shareholders for returns, you’re going to put your money where – as you should, that is your responsibility plus (it) gets the greatest return.”

Indeed. Lowering the corporate tax rate could send US stocks into a frenzy at some point. But the US deficit will march ever higher – until confidence really does break.

My suggestion? Accumulate shares while this uncertainly and market weakness plays out. Don’t go all in at once.

Use a reasonable time frame. Patience is often rewarded. Try to think 1 to 2 years out. Don’t let further volatility spook you.

3. Where to look for ideas?

I already put 5 down in this report for you.

However, by far the most relevant news this week is that Australia’s two political parties became one.

Liberal and Labor are just B1 and B2 of the Property Party.

Why not throw all tax and economic advice out the window?

Here’s gun property analyst Louis Christopher on the announced policies:

““They’re both inflationary. You need to model this stuff up but for a finger-into-the-wind guess, you would see prices rise 8-15 per cent, 12 months after the policies were enacted,”…

“Arguably, Labor is going to be more inflationary for the existing home market than the Coalition’s, but I’m with many analysts who’ve criticised both policies because what the country needs more is strong reform in a housing market on the supply side.

“And this isn’t it. These are Band-Aids, which are going to fall off very quickly.”

Property shares should be on your watchlist, with all the usual risks and caveats in mind.

Add it all up, and we’ll call it the coming crack up boom.

Best wishes,

Callum Newman,
Editor, Small-Cap Systems and Australian Small-Cap Investigator

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Murray’s Chart of the Day
— S&P 500 Weekly Chart

By Murray Dawes, Tuesday, 15 April 2025

The immense volatility of the past few weeks has seen price action that I would expect to see over six months happen in just days.

But the technical levels remain important despite the wild ride.

The chart above shows you the S&P 500 weekly chart. It is clear the midpoint or point of control of the rally in 2023 and 2024 proved to be strong support for the S&P 500.

It’s important to get that confirmation so you can calculate the key levels moving forward.

The bounce from the point of control has been so vicious that the S&P 500 is already nudging up against the sell zone of the wave.

So we may see further upside on this rally in coming weeks, but the risks are rising. Investors should be taking this opportunity to lighten exposure and increase protection.

Even if the low is already in I would expect to see more volatility ahead. Credit spreads are rising which is often a good lead indicator on equity market weakness.

The next retest of the point of control will be a worrying development because a failure below there gives targets that are 15% below the point of control.

In other words, even if it is a mistake to lower exposure on this rally, the potential downside is so great that it is worth lowering risk until the road ahead is clearer.

Regards,

Murray Dawes,
Editor, Retirement Trader and Fat Tail Microcaps