Stock Market UP FOMO Trap? Is Recession Ahead?

$S&P 500(.SPX)$ $NASDAQ(.IXIC)$

Global Markets: What We Need to Talk About Right Now

In this articles, we need to cover a lot. What’s going on in global markets? What’s the current situation based on the available soft and hard data? What can we reasonably forecast, and what remains unknown? Most importantly, what does all of this mean for us as investors—and how should we position ourselves moving forward?

Let’s take it step by step. We’ll begin with what’s happening with tariffs—one of the major macro catalysts driving volatility today—and then move through the bigger picture, connecting the dots across markets, commodities, policy responses, and long-term investing.

I. Tariffs: A New Global Reality

Tariffs are back in the headlines. The trade tensions that began as minor skirmishes are now full-scale battles, with the first round of retaliation from China already in motion. We’ve entered an era where tariffs are no longer a negotiating tactic—they’re becoming structural features of global policy.

Attaching costs to global trade—whether through direct tariffs or indirect regulatory pressure—raises the prices of goods and disrupts long-established supply chains. Just take rare earth materials, for instance: essential for tech, energy, and defense sectors, and largely controlled by China. If those get restricted or taxed, the knock-on effects are massive.

President Trump claims that China "played it wrong" and that this tough stance is a necessary correction. But the market is telling a different story. What we’re experiencing are tectonic shifts—a transformation in how the world economy operates. The frameworks that governed global trade last year may no longer apply next year—or even next month.

Markets are reacting quickly and severely, and not without reason. Trump's assurances that "everything will be great" and that America will become wealthy again sound optimistic—but are they realistic?

This brings us to a broader point: what is wealth, really? Is it just GDP? Is it a rising stock market? Consider this: Americans live, on average, 7 years fewer than the Swiss. So if we measure wealth by quality of life, access to healthcare, or sustainability, the picture is very different. Wealth is more than just financial metrics—it’s about long-term resilience.

And from a financial standpoint, we’re already seeing wealth destruction. JPMorgan has issued early warnings of a possible U.S. recession. That’s not a forecast made lightly.

Trump, however, continues to frame the market's drop as necessary medicine. According to him, this is part of a larger plan to fix long-standing imbalances and return America to greatness. Whether or not that plan works is a separate question—but it’s one that markets are actively pricing in right now.

II. The Trade Balance and the Front-Loaded Economy

Look at the U.S. trade balance. It has ballooned as companies and consumers rushed to import goods before tariffs take effect. This kind of front-loading creates a short-term illusion of strength—sales go up, orders pile in, but it all fades once the tariffs actually hit.

The consequence? Slower trade down the line, possible stockpiling distortions, and weaker-than-expected tax revenues as import volumes drop off. That makes it even harder for governments to justify fiscal stimulus, especially if deficits are already widening.

The trade war isn’t just a headline—it’s reshaping the flow of global goods, services, capital, and ultimately, wealth.

III. Recession Signals Are Flashing

Let’s talk about markets.

The S&P 500 is down around 17% from its highs just six weeks ago. Other global markets are deeply in the red. Even Treasuries—traditionally a safe haven—are down. This isn’t inflation-driven. What we’re seeing instead is the market pricing in a recession.

Why? Because when stock prices fall, consumer confidence tends to fall right behind it. In the U.S., consumer spending makes up 68% of GDP. And a significant portion of consumer balance sheets is tied to the markets—via 401(k)s, pensions, brokerage accounts, etc.

As portfolios shrink, people spend less. They delay buying homes, cars, appliances. They cancel vacations. That ripples through the economy. Businesses stop hiring. They shelve investment plans. The result? The classic recessionary spiral.

And we’re already in motion.

Add on top of that the business uncertainty. CEOs, founders, and investors don’t operate in 30-day cycles. They look 3, 5, 10 years ahead. And if that horizon looks foggy or hostile, capital deployment slows down. We’re already seeing CAPEX (capital expenditures) budgets being slashed. Hiring freezes are becoming more common.

Uncertainty freezes everything.

IV. Historical Parallels & Lessons

Let’s not forget history. The Smoot-Hawley Tariff Act of 1930 aimed to protect American industries—but ended up being a catastrophe. Even before the Act was fully implemented, trading partners retaliated. Global trade collapsed. Prices soared, demand collapsed, and what followed was the Great Depression.

Sound familiar?

Even Trump’s own administration may be underestimating how fast things can unwind when confidence disappears.

We are not saying a Great Depression is inevitable—but we are saying that when the world deglobalizes in a sudden, uncoordinated way, the risks multiply. Supply chains don’t realign overnight. Trust is slow to rebuild. And the cost of getting it wrong can be massive.

V. Commodities as Leading Indicators

Want a raw, unfiltered signal of what’s ahead? Look at commodities.

Copper, often called "Dr. Copper" because of its ability to forecast economic trends, is plunging. It’s a key input for infrastructure, manufacturing, and electronics. A falling copper price signals shrinking demand, and thus slowing economic growth.

Oil prices have also dropped sharply—from a stable $70–$71 range to below $60. That’s not a trivial move. Energy markets are massive, interconnected, and often early in pricing in macro shifts.

Commodities are basically the real-time pulse of the industrial world. And that pulse is weak right now.

VI. A High Starting Point: The Market Was Priced for Perfection

It’s important to remember: markets didn’t start from a neutral point. A few months ago, the U.S. market was priced for perfection. The cyclically adjusted price-to-earnings ratio (CAPE) was 37—higher than any point in history except for the dotcom bubble.

That means expectations were sky-high. Everything had to go right just to justify valuations.

So when things didn’t go right—when tariffs escalated, earnings guidance softened, and macro risks rose—the market had a long way to fall. Even without a full-blown recession, just a return to historical valuation averages could mean another 40–50% downside.

If we do see a recession or stagflation, that’s a recipe for even deeper declines.

VII. What Do We Actually Know?

We know that uncertainty is extremely high. We don’t know what will happen with tariffs, trade negotiations, the Fed, inflation, unemployment, or geopolitical retaliation. We don’t know whether deals will be struck or if a full trade war will escalate.

But we do know a few things:

• Tariffs reduce global productivity and trade.

• They increase the cost of doing business.

• They lead to lower profitability, lower investment, and ultimately, slower growth.

And even if the U.S. comes out "less poor" than others, the entire world will be poorer.

VIII. Long-Term Investing in a High-Uncertainty Environment

So, how do we invest in this kind of environment?

The answer lies in long-term value investing. Not in guessing short-term macro outcomes or trying to time market bottoms. In environments like this, you go back to fundamentals:

• What’s the business?

• What’s its competitive advantage?

• Can it thrive across economic cycles?

• Is it reasonably priced?

Focus on companies with durable moats. Look for businesses that will survive and grow regardless of who’s in office, what tariffs are imposed, or where interest rates go.

Because when you find those kinds of companies—and you buy them at fair or undervalued prices—you create a portfolio that can weather almost any storm.

IX. Final Thought: The Investor’s Mindset

Investing is a long-term game. It's not about predicting headlines. It's about staying disciplined through cycles. You will never have perfect information. There will always be uncertainty.

The key is to embrace that uncertainty and invest despite it—not recklessly, but rationally. Price versus value. Risk versus reward. That’s the mindset we need to build and maintain.

In the next two videos, we’ll go deeper:

1. Understanding Market Cycles – How to use cycles to your advantage.

2. Building a Long-Term Value Portfolio – What to look for in uncertain times.

Because at the end of the day, the world changes—but value endures.

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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