U.S. stocks plunged to start the week on Monday. The Dow lost almost 900 points, while the Nasdaq was down a whopping 727 points. The Nasdaq has fallen below 17,500. It wasn’t long ago that surpassed 20,000.
Bitcoin has also fallen substantially after the initial bump after the election. After trading at over $100,000 per bitcoin, it has now fallen below $80,000.
Gold has slipped below $2,900 per ounce, but it is holding up pretty well in comparison to most everything else.
Trump’s Humility
In a rare moment of humility Donald Trump said that we are in “a period of transition”, and when asked about the possibility of a recession, Trump wouldn’t exactly rule that out. He said, “I hate to predict things like that. There is a period of transition because what we’re doing is very big.”
Perhaps Trump is referring to his administration’s attempt to uncover waste and fraudulent spending, much of which is serving to undermine the American people and spread the establishment narratives.
If we actually get significant cuts in government spending, it will be disruptive to some people, especially the ruling elite. But that won’t cause a recession.
The Yield Curve
A recession is baked into the cake. We had an inverted yield curve for all of 2023 and most of 2024. It has finally started to flatten and somewhat normalize in recent months, which means we should get a recession soon.
You can’t blame Trump for this unless you want to blame Trump from 2020. Trump went along with the lockdowns and the massive digital money printing that helped blow up this bubble.
We probably would have had a deep recession in 2020 if not for the massive injection of new money in March and April of 2020. This delayed the inevitable, and now we are in an even worse situation.
Just the Beginning
Don’t get fooled by the down stocks and think that things will turn around quickly. We have grown accustomed to temporary bear markets that seem to last a couple of weeks. Before long, we are hitting new all-time highs again.
We have to go back to 2008/ 2009 to see a big market crash. It’s been 16 years. Even that one didn’t last that long, but the drop was massive.
Some who are supposedly on the pessimistic side say that we might see a 20 or 25 percent drop in stocks. But then they assure us that everything will be just fine because stocks always go up in the long run.
I can’t rule out a drop of 75% or more, particularly with the Nasdaq. We don’t know how the Fed will react with a recession and a plunging stock market, but let’s remember that price inflation is still above their 2% target. And I doubt that Jerome Powell is in a great hurry to bail out Donald Trump from a recession.
When the Nasdaq peaked in the tech bubble of the late 1990s/ early 2000s, it peaked at just over 5,000. I wouldn’t be shocked to see a bottom somewhere around that level in the future. That would be about a 75% drop from the peak at just over 20,000.
Be prepared!