Good day, Tiger investors.
We seem to be stepping into a very different world—one marked by increasing uncertainty, economic upheaval, and shifting global dynamics. This past week has been especially turbulent, touching nearly every aspect of our interconnected systems—economics, finance, global trade. The shockwaves are real, and they demand thoughtful discussion.
As investors, we are compelled to look beyond the noise. Yes, the headlines are intense. But we must keep our focus: evaluate risk vs. reward, analyze the long-term implications, and understand where opportunities lie amid chaos. That’s our job, and that’s how we prosper when others panic.
A Changing Global Landscape
Let me offer a personal take. The recent push toward tariffs and protectionism is, in my opinion, a politically driven move aimed at making America “prosper again.” The logic behind it is that, for decades, the U.S. has sacrificed its economic advantage so that other countries—especially emerging markets—could grow rich. On the surface, this seems like a justifiable concern. But let’s take a deeper look.
When you observe the U.S. stock market’s weight in global market capitalization, the numbers tell a different story. It stood at around 30% in the early 2000s, rose to 40%, and eventually climbed to 70% before the introduction of tariffs. Today, even after turbulence, it's still hovering around 65%. These are dominant figures. It’s clear: America has prospered—largely thanks to globalization and its ability to export innovation, technology, and capital.
The idea that the U.S. has been “taken advantage of” simply doesn't align with how markets have actually performed. Other nations have grown, yes—but so has the U.S., and more than any other player.
Winners and Losers in Global Trade
Now let’s look at other major economies. Europe, for example, held a 20% share in global market cap not long ago. Today, it’s down to 12%. Japan once commanded 40%, but now contributes just 5%. Meanwhile, emerging markets have grown significantly in terms of GDP—but in market cap, they still hold a modest 10%.
This tells us that although emerging economies have seen strong GDP growth—6%, 7%, even 10% annually—the financial markets and global capital flows still heavily favor the U.S. This is not a story of American decline. On the contrary—it’s a story of American capital dominance.
So, let’s not kid ourselves: the U.S. benefited massively from global trade over the past two decades. But here’s the key: it wasn’t manufacturing that led this prosperity—it was technology, innovation, intellectual property, and global finance. That’s where the U.S. excels. Manufacturing played a diminishing role, replaced by high-value sectors.
The Myth of Manufacturing Revival
Let’s talk about jobs. Today, unemployment in the United States stands at 4.1%—a figure historically recognized as full employment. Since 1974, this level has only been reached a couple of times. There is no economic imperative to bring back large-scale manufacturing jobs. This push is politically motivated, and in truth, it’s a high-risk gamble.
Now, that gamble might cost a lot of people—workers, companies, global supply chains. But it doesn’t necessarily cost us. As value investors, we thrive on volatility. We profit from mispricing, fear, and forced selling. That’s how we’re built. So in a twisted way, chaos creates opportunity. Still, from a macroeconomic perspective, I believe tariffs are a mistake.
Free Trade = Shared Prosperity
Trade isn’t a zero-sum game. When others prosper, we prosper too. Take Apple as a case study. Roughly 17% of Apple’s revenue comes from China. Apple makes up about 7% of the S&P 500. That means 1.19% of the S&P—and by extension, about 1% of your pension if it's invested in the index—depends on the fact that Chinese consumers are wealthy enough to buy iPhones.
That’s the beauty of free trade. We grow richer together. If your neighbor gets richer, you can sell to him, trade with him, and both win. Protectionism—building walls instead of bridges—limits that growth. History consistently proves that trade barriers reduce overall wealth.
A Test of Global Power
Beyond economics, this also seems to be a test of power. The U.S. appears to be flexing its muscles to see who blinks first. Will other nations back down? Or will they retaliate? The danger here is in the scale and scope of this confrontation.
This isn’t a targeted skirmish—it’s a global trade war. The U.S. is picking fights with everyone. China, Canada, Mexico, Europe. Normally, when nations negotiate trade deals, they isolate one partner at a time and maintain alliances with others. This situation is different—it's spreading risk in every direction.
We, as investors, know what that means: over-diversification dilutes performance. In portfolio terms, this is a classic case of “diworsification.” Too many battles, too many variables, too much risk.
The Fallout Begins
Markets have already reacted. The S&P 500 recently experienced its worst drop since COVID, rattled by the uncertainty of tariffs. Companies are concerned, consumers are confused, and policymakers are scrambling.
And the pain is political too. Approval ratings are dropping. Consumer confidence is starting to shake. Recession fears are surfacing—not necessarily in Q1, since people rushed to make purchases before tariffs kicked in—but possibly later this year or next.
Adding another layer of concern, interest rate tools may be limited. The Federal Reserve might not be able to cut rates in response to a slowdown if inflation remains elevated. Other countries are already moving—central banks in Asia and Europe are easing. But the U.S. may be stuck between a rock and a hard place.
A Global Supply Chain Can’t Be Rebuilt Overnight
Let’s not forget the complexity of global supply chains. Take smartphones. Apple, Samsung, Huawei—none of these phones are made in the U.S. Even if companies wanted to move manufacturing home, they couldn’t. It takes years to build infrastructure, retrain labor, and reestablish supplier networks. And even then, the cost of production would skyrocket, inflating prices for consumers.
And what if policies change again in two years? All those investments would be sunk costs. Businesses don’t operate on two-year election cycles—they need stability and predictability to plan for the long term.
That’s why companies like Apple manufacture in China—it’s efficient, cost-effective, and deeply embedded in a system that works. You can’t just uproot that.
Global Shifts and Uncertainty
When we look at the global landscape, it's clear that while many regions are expanding and evolving, there are critical supply chain and production challenges—especially in areas like rare earth mining, lithium, and copper. Much of the current supply is either concentrated in China or dependent on imports. To shift away from this setup would require massive capital investments to rebuild infrastructure and supply chains elsewhere. But here’s the catch: who is willing to invest billions in something that might be rendered obsolete by the next policy reversal?
This level of uncertainty is toxic for long-term planning. Businesses are hesitant. Capital stays on the sidelines. And when investment slows, so does growth. The result? A heightened risk of recession, declining business confidence, and, in many countries, a renewed push for lower interest rates, potentially accompanied by monetary stimulus or money printing.
Inflation, Recession, and the Unknowns Ahead
There’s no clear answer yet on how this will all play out. Inflation could continue to rise—even in the face of a recession. This combination is particularly dangerous and rare, but not impossible. Will tariffs alone push the U.S. into a recession? It’s plausible. We don't have the answers yet—we can only monitor the developments in real-time.
We’re already seeing early symptoms. The recent market correction, triggered by tariff concerns and geopolitical tension, is more than just a blip. It chips away at consumer confidence, affects retirement accounts, and slows consumer spending. That behavioral shift can, in itself, become a self-fulfilling recession.
And everything from here on is behavioral. It hinges on how people react—investors, consumers, corporations, and policymakers. Will there be continued demand for U.S. treasuries? What will deficits look like? How will long-term debt evolve? Where will interest rates go? These are all questions with no clear answers. That’s what makes investing both fascinating and frustrating—uncertainty is the only certainty.
Mean Reversion and Valuation Reset
Let’s not forget: markets have been overvalued for a while. What we may be seeing now is a reversion to the mean, driven by fundamental macroeconomic changes, policy risks, and behavioral shifts. We’ll dive deeper into this in our upcoming quarterly market outlook—as usual, I’m crunching data and producing insights as fast as possible because this has become a hot and fast-moving topic.
The Bigger Game: U.S. vs. The World
There’s also a deeper geopolitical tension brewing. This is no longer just about trade—it's about global positioning and dominance. The big question is: Who will adapt faster? Who can withstand more pain? The U.S. assumed that the rest of the world would buckle under pressure. But now we’re seeing pushback.
The global investment environment is reacting. Major tech firms that announced aggressive AI investments are now pulling back. Global M&A dealmaking has collapsed—from $500 billion last quarter to just $250 billion this quarter—a 50% decline. Confidence is slipping.
Leaders like Macron have already publicly stated that European investments will pause. Ursula von der Leyen has spoken of strategic retaliation. If this continues, we’re looking at a global trade war with the U.S. at odds with nearly everyone. Historically, when one country attempts to isolate itself from global trade, the outcome is rarely positive—especially for that country.
The Danger of U.S. Isolation
The question now is: Is the U.S. powerful enough to stand alone? It’s certainly strong, but no nation is invincible when fighting everyone at once. The worst-case scenario is a form of economic isolation, where alliances break down, deals are lost, and global supply chains reroute away from the U.S. While the world might take a hit in the short term, it will adapt, as it always has.
And yet, for us as investors, lower prices create higher future returns. That’s the silver lining. Corrections bring clarity. They bring opportunities. We reinvest at better valuations, we accumulate when others panic, and we focus on what matters—quality and long-term value.
Return to Fundamentals: Value, Durability, and Moats
In this market environment, almost everything is in the red. Investors are selling across the board—no discrimination, no nuance. That’s where we, as value investors, begin our work. We look at economic moats, durability, and long-term competitiveness. We don’t panic when Amazon drops 10% in a day. We ask: Where will Amazon be 10 years from now? If we believe in the long-term story, these pullbacks are gifts.
Short-term chaos doesn’t change long-term value. Recessions will come and go. Panic will spread. But fundamentals endure. That’s what we invest in.
The Human Element
Ultimately, everything hinges on human behavior. Our collective ability to learn, adapt, and evolve. I believe that, despite the missteps and the noise, humanity has shown remarkable resilience over the long term. I want everyone to be richer—because if my neighbor is wealthier, I become wealthier too through trade, collaboration, and innovation.
That’s been the story of the last 20–25 years—arguably the most prosperous period in human history. And I remain hopeful that the next 25 years can be even better. If not? We adapt. We endure. We invest in value.
Conclusion
We are witnessing a turning point. The post-crisis global stability that defined the last 15 years is being challenged. What comes next is uncertain. But as investors, we are not spectators—we are navigators.
We must evaluate both macro trends and micro opportunities, remain flexible, and focus on long-term value creation. While tariffs and political disruption create chaos, they also create mispricing. That’s where our edge lies.
Yes, there’s risk. But there’s also reward—if we keep our heads clear and our strategies disciplined.
Disclaimer: I want to make it clear that I am not a financial advisor, and nothing I say is intended to be a recommendation to buy or sell any financial instrument. Additionally, it's important to remember that there are no guarantees or certainties in trading or investing, and you should never invest money that you can't afford to lose.
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