In early 2025, the financial markets faced a precarious situation:
• Elevated Equity Prices: The S&P 500 Index (SPX) had experienced significant growth, with U.S. stocks accounting for over 64% of the global market value, largely driven by tech sector gains .
• Rising 10-Year Treasury Yields: The yield on the 10-year U.S. Treasury note reached a peak of 4.79% on January 14, 2025 .
Historically, such a combination—high equity valuations alongside rising bond yields—has raised concerns about potential market corrections. Elevated bond yields can make fixed-income investments more attractive, potentially diverting capital away from equities and increasing borrowing costs for companies, thereby impacting profit margins.
Enter President Trump’s strategic implementation of tariffs:
• Tariff Measures: In March 2025, the administration imposed 25% tariffs on goods from Canada and Mexico and increased existing tariffs on Chinese imports to 20% .
While tariffs are often viewed as inflationary due to increased import costs, they can also have deflationary effects by reducing monetary velocity. Higher tariffs can lead to reduced trade volumes, slowing down the rate at which money circulates within the economy. This deceleration can counteract inflationary pressures, stabilizing prices .
By intentionally implementing these tariffs, the administration may have aimed to temper the overheating equity markets, encouraging a healthy correction and preventing a more severe future crash. This preemptive move could steer the market toward sustainable growth, balancing the scales between equities and bond yields.
In conclusion, the strategic use of tariffs may have been a calculated effort to deflate an overextended market, ensuring long-term economic stability and averting a potential financial crisis.
This strategic tariff implementation isn’t just about stabilizing the market—it’s setting the stage for a massive buying opportunity. As the tariffs put temporary downward pressure on equities and slow the economy to a healthier pace, valuations will become more attractive for long-term investors. Once the tariffs are reversed, we can expect some form of compensation or concessions from affected countries, likely in the form of trade agreements or favorable foreign policy adjustments. These moves would reinvigorate global trade, strengthen the U.S. economy, and act as a catalyst for an unprecedented stock market rally. With a rebalanced market and improved international relations, the conditions would be ripe for what could be the greatest bull run in history, cementing the U.S. as the leader of the global financial stage. This is the ultimate play—patience and timing will be key to capitalizing on it.
This is why the 10 year is crashing while equities crash. Big dicks are hoarding cash.
My position on this market will be hold puts overnight and flip calls. So far up $10k on 13k MTD.