The market has been churning near 600 for several weeks now, and I expect volatility to increase significantly—at least for the first 100 days of the Trump presidency.
Key Risks Driving Market Instability
- Trade War Uncertainty
The proposed 25% tariffs on Canada and Mexico are temporarily on hold for 30 days, but if they take effect, they could deliver a massive economic shock. Global supply chains, corporate earnings, and consumer prices will all feel the strain. - Geopolitical Turmoil
The Middle East remains in crisis, which could send energy prices soaring if no diplomatic resolution is reached. Meanwhile, the ongoing Russia-Ukraine war continues to weaken the global economy, further straining investor confidence. - Market Overvaluation
The Buffett Market Indicator suggests that equities are overvalued by more than 200%. Historically, such extreme levels have preceded sharp corrections. - Emerging Risks from China
The rise of disruptive technologies like DeepSeek AI from China could impact global industries in unpredictable ways. Additionally, China’s economic slowdown poses another potential risk for markets.
A House of Cards Waiting for a Black Swan
With an overvalued stock market, geopolitical instability, and economic uncertainty fueled by unpredictable policies, the market appears fragile. All it takes is one significant “black swan” event to trigger a downturn. Whether it comes from trade, war, technology, or politics, the ingredients for heightened volatility are already in place.
Investors should brace for a turbulent ride ahead.
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