VRA Investment Letter: A Dovish Fed Meeting with "Transitory" Inflation from Tariffs. Wayne Root's Message to President Trump. Gold ATH.
/Good Thursday morning. As expected, yesterday’s FOMC statement and Powell presser was dovish. The markets liked it, with solid gains and excellent internals. While there was no messaging about a rate cut at their next meeting (May 7), Powell used the word “uncertainty” 16 times, saying that it’s impossible to know the outcome on tariffs (April 2 ) “because we’ve yet to learn exactly what they will be or their impact on the economy”. The Fed continues to expect two rate cuts over the rest of 2025. The Fed also cut QT and lowered their GDP estimates for this year from 2.1% growth to 1.7%, while raising their unemployment rate forecasts to 4.4% from 4.3%.
But here’s the part that the markets really liked (I think we may have Treasury Secretary Scott Bessent to thank for this). Both the FOMC statement and Powell stated that core inflation will fall to 2.2% by the end of 2026 with 2% inflation by end of 2027, resulting in this head-turner from Powell “our base case is that tariff inflation will be short-lived…we believe it will be transitory (there’s that word again!)” And just like that, stocks, gold and Bitcoin jumped, while interest rates continued their decline. This morning 10 yr yields have fallen even further, at just 4.18% (they were 4.8% in mid-January).
Powell also stated “the odds of a recession are low (duh)” while the cuts from DOGE “might be felt in DC but will have only a small effect on national unemployment levels”.
Know this; with record levels of fund managers dumping US stocks for European/global equities (BofA Survey), US markets are set for a dramatic short squeeze higher. Trump has the bears right where he wants them, should he choose to act.
Last night, following my talk with our great friend Wayne Allyn Root, Wayne sent the following to 47 (via text):
“A group of my close friends are big-time traders on Wall Street. They want me to share with you If you’re going to settle trade wars, do it by April 2nd. Get deals in place by then.
You can literally crush the bears, most of whom just happen to be Trump haters. You will destroy any and all resistance. It will all be over…In a rout…
Markets will explode up…should you strike some kind of tariff agreements by 4/2. We are talking a complete melt up. Your doubters and naysayers and enemies will be routed and demoralized. Get those trade deals done quickly and the battle is over. You’ve crushed your enemies.”
Thank you Wayne (isn’t it nice having friends in high places). And remember, when Wayne recommended doing away with taxes on tips and social security (among many other recommendations from Wayne), President Trump took action. Wayne clearly has the Presidents ear. Now’s the time to crush the shorts.
VRA Bottom Line: there’s no way we would be short this market. Trump is a deal maker and while there’s little question he’s fully committed to using tariffs to restore domestic manufacturing and “an economy for everyone”, we also know how important the markets are to Trump and his closest advisors (they know that animal spirits matter). We continue to expect “deals to be reached”…we expect Trump to pivot…as we head into 4/2. Regardless, tariff fear mongering is reaching its zenith and we’ll soon get to the point where tariffs stop impacting the markets. We continue to watch the action in the semis, tech, the internals and the smart money hour. We remain bullish.
We Agree With You 100%, Mr. President
Tariff fear-mongering and propaganda.
Folks, there’s some serious indoctrination with the public going on here. Yesterday we learned that the University of Michigan Consumer Confidence Survey came in with inflationary expectations at a 31 year high. Gee, I wonder why that might be? This takes me back to the Russia hoax and Plandemic propaganda days, where 100% of the MSM parroted the same message, day after day, 24/7. We didn’t buy into the plandemic fear mongering and we’re not buying into the tariff propaganda of “the economy is headed into a recession”, either.
Consider what we learned just this week:
– Total industrial production across the economy was up +.07% in February (expectations were +.02%) with manufacturing output rising to an ATH with gains of +0.9% (vs expected +0.3%).
– Motor vehicle and parts output rose +8.5%
– Gas prices fell for the 4th straight week, as prices hit a 4 year low (below $3 across much of the country).
– Egg prices fell again, now down over 50% under Trump.
– US Existing Home Sales beat expectations
VRA Bottom Line: yes, Team Trump’s handling of their tariff policy has been sloppy. With just 2 weeks to go before the 4/2 tariff policies go into effect, there’s been no clear-cut plan of exactly how they are going to work. And Trump doesn’t do “sloppy”. While we’re convinced that Trump is committed to using tariffs to rebuild our manufacturing base (as he should), we also believe that prior to 4/2 we’ll learn that yes, these were also a negotiation tool. The end result is that agreements will likely be reached and the tariff cliff will be averted. This will result in a “sell the rumor, buy the news event”, meaning that a massive relief rally will kick in for US equities.
Gold Surges to $3065/oz. The Miners Are Ready to Go Parabolic
We find this remarkable. Gold is hitting ATH after ATH yet the miners (GDX) remain 33% below their ATH’s from 9/6/2011 and the junior miners (GDXJ) are an almost impossible to believe 67% below their ATH’s.
Now add in the fact that investors continue to hate this group. ETF allocations to gold and the miners remain near the lowest level in 20 years, a recipe for an explosive move higher.
We repeat; it’s time for the miners to truly go parabolic, with a run that lasts 2–3 years (at minimum). VRA Gold Mining Buy Recs are a must-own here.
Until next time, thanks again for reading…
Kip
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