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Over the weekend, there were rumors/news about a short squeeze happening today due to speculation around smartphone and semiconductor tariff exemptions. Many stock traders anticipated this, but the market only rose slightly over 1% before stabilizing.
It seems traders are holding back, waiting for Trump’s announcement today, which is not about exempting semiconductor tariffs but something related to it.Recently, Trump’s “magic show” has been causing turbulence in the U.S. stock market.
What does his tariff frenzy signify?
To cut to the chase, it indicates that the massive bubble in the U.S. stock market can no longer be sustained and that a major burst is approaching.Since the 2008 financial crisis, the driving force behind the enormous bubble in the U.S. stock market has been the Federal Reserve’s money printing.
The Fed printed massive amounts of money to buy government bonds, which encouraged the government to issue more bonds, leading to a staggering increase in fiscal deficits. Through complex processes, this money flowed into the U.S. stock market, inflating the bubble endlessly. At the same time, stock traders’ wallets grew fatter, and figures like Elon Musk rose to become the world’s richest.However, the situation has reached a point where the government can no longer ignore the fiscal deficit. Trump, a peculiar president, is trying to address this through tariffs, causing the current chaos.
While Trump’s approach is unique, any president would have faced the reality of an endlessly expanding fiscal deficit. Others might have tried different methods, like tax hikes, to reduce the deficit.If the fiscal deficit must be significantly reduced, the government and the Fed can no longer openly prioritize stock traders’ wallets as they did in the past. Of course, they might step in to “pretend to rescue” during stock market crashes like last week, but in the long run, the government and the Fed can no longer fully commit to policies that ensure the perpetual upward trajectory of U.S. stocks.
Thus, the myth of the eternal upward trend in U.S. stocks is entering its final phase. While it’s hard to guarantee an immediate downturn, the time is undoubtedly approaching. Perhaps, during my lifetime, I might witness a prolonged downward trend in U.S. stocks.
Disclaimer: Just because I posted this scribble doesn’t mean you should go short, buy inverse stocks/put options recklessly. I won’t be responsible if you lose your entire fortune due to a short squeeze.
