“There’s two parts to this: It’s accelerating the economy, growing the revenue base — and controlling expenses. In the U.S., we do not have a revenue problem, we have a spending problem.”
–Secretary of the Treasury Scott Bessent, outlining the case for a “detox” period in the months ahead
March 14, 2025 — “We knew this was coming,” writes Caryl P. “This is exactly why playing stupid doesn’t help!”
We’re back in the tiki hut. The sun is actually too hot today.
Can you believe that my laptop is giving me grief? Sweat glands and mobility issues are two challenges facing the machines if we expect the new age of AI singularity to bear fruit.
To our good fortune, gold briefly broke the $3,000 psychological barrier, trading to $3004 overnight in Asia and peaking at $3,017 in early U.S. trading.
Among other trends, the world’s central banks are gobbling it up like seagulls fighting over French fries.
The yellow metal’s rise over the past quarter-century, from an afterthought to a tenfold increase in price, has outpaced even the S&P 500, which has merely quadrupled over the same period.
The moral of this short story? As it always has been. You can print dollars, but you can’t print gold.
Another reason for gold’s rise: Economic fragility is rearing its mug across the globe. And Trump — never one to let a delicate situation remain unprovoked — is busy rewriting the rules of global trade with tariffs that make Smoot-Hawley look like a friendly handshake.
As he must.
Hang that thought…
In the markets, the S&P 500 and Nasdaq have tumbled into correction territory, down 10% from their peak in mid-February. Only 16 trading sessions erased $5 trillion in paper wealth.
For context, that’s the seventh-fastest drawdown since 1929, and three of those seven have happened under Trump’s watch — 2018, 2020, and now. If nothing else, the man has a talent for presiding over market carnage.
On top of that, consistent with our January forecast, U.S. equities have fared the worst among the major asset classes since Trump took office on January 20, with the S&P 500 dropping about 8% and the Nasdaq 100 Index sliding more than 10%.
And according to the “smart money” on Wall Street, it’s still early days for the selloff, even if there’s a short-term “relief rally” ahead.
“Most corrections take about two months to play out,” John Kolovos, chief technical strategist at Macro Risk Advisors, told Bloomberg last night. While stocks appear oversold, “we aren’t there yet in terms of time, as it took us about two weeks to get to these levels,” he said.
Some chart-watchers, ever the optimists, insist that all we need is a good bounce off the 200-day moving average. Others point out that we’re already at oversold levels, implying a rebound could be near.
Bank of America’s Michael Hartnett, meanwhile, assures us that this is merely a technical correction, not a bear market.
Translation: Keep calm and keep buying. A Wall Street mantra.
The Trump Master Playbook
The thing is, Wall Street’s not entirely wrong. But a couple of words of warning:
What you buy matters right now more than it has since 2022. That’s a view we’ve stated in our latest research right here: the market is busy choosing winners and losers.
Enter the Trump Master Playbook — a scenario where interest rates fall enough to dodge a recession (with or without the Fed), and the economy roars back from slowing growth fueled by massive government cuts.
Late 2025 kicks off like a scripted comeback, and the 2026 midterms keep the MAGA coalition in power.
Under this playbook, markets wobble early, spooked by tariffs and policy shifts, but the bond market forces Powell’s hand, slashing rates. By year’s end, cheap money fuels a new bull run. By 2026, the economy hits full stride — booming housing, surging small caps, and a stock market on a sugar high.
Tech and AI explode, and Washington looks like geniuses for refinancing debt at rock-bottom rates. If this holds, it’s the ‘90s or post-2009 on steroids — with bigger bets, bigger risks, and bigger gains. It’ll make the last Roaring 20s look like a sideways market.
The key insight Trump believes will work? That he can bring down interest rates and rein in inflation using means other than the Fed’s overnight rate.
So far, it seems to be working…
All the hand-wringing over Musk, DOGE, tariffs, and military alliances is just media noise amplifying the loudest whiners — the people most dependent on the status quo.
Meanwhile, the controlled demolition of the “unsustainable” in all its forms is a prerequisite for economic growth.
The unsustainable encompasses each of the following: rising deficits and debt, rising consumer debt, rising interest rates, rising consumer prices, unfair “free trade” agreements, global policing and military alliances, and the ever-growing contractor network.
The key difference this time?
Trump isn’t just playing for the market’s affection — he’s engineering a controlled demolition of the bureaucratic state, or as he calls it, a “detox.”
One sign of the fiscal fix underway? The surging growth of government jobs. Working for Uncle Sam used to account for 5-7% of new jobs, but spiked to 25% of all new jobs in the past two years.
Love them or hate them, the Trump appointees are tackling an historic government morass. Get used to the “chaos.” It’s as necessary an evil as government itself. Otherwise, we all go bankrupt together.
But it’s not just the U.S. government being demolished. Global trade agreements and military alliances face a bankruptcy-like restructuring as a necessary prerequisite for sustainable economic growth.
Wall Street, so used to getting bailed out, is suddenly realizing that this administration is willing to let markets bleed if it serves a greater goal.
As Ross Mayfield at Baird put it, “The Trump administration seems a little more accepting of the idea that they’re OK with the market falling, and they’re potentially even OK with a recession in order to exact their broader goals. I think that’s a big wake-up call for Wall Street.”
Treasury Secretary Scott Bessent has made it clear: Trump’s focus is on lowering long-term borrowing costs across the board — from mortgages to business investments to the government’s own debt.
He’s not wrong when he says, “The market and the economy have just become hooked, and we’ve become addicted to this government spending. There’s going to be a detox period.”
Like any detox program, it comes with short-term pain — stocks whipsawing, bond yields diving, and a shift away from reckless deficit spending — but the long-term play is to lay a solid foundation for real, sustainable growth.
Markets haven’t had this kind of detox since the 1980-1982 period, when Paul Volcker raised interest rates to 20% to crush inflation. Once that was out of the system, the 1980s saw soaring growth that even spilled into the 1990s. Rising productivity and technology eventually led to the tech boom – but not before unleashing 20 years of relative prosperity.
And Trump himself? He’s been signaling his intentions loud and clear. “Interest rates are going down, you know what else is going down… what have I been trying to get down? Energy. Energy is going down,” he declared to his fans on Fox News.
Trump is not concerned about Wall Street’s tantrums — his priority is recalibrating the entire economic system, even if it means taking a temporary hit. “What I have to do is build a strong country. You can’t really watch the stock market. What we’re doing is building a tremendous foundation for the future.”
That is the actual Grey Swan event on our horizon.
We had another research call this morning. Our research team is assembling support for the argument that Trump and his team can – and will – pull off the demolition in 18 months, hook or by crook.
That’s the countdown to when DOGE’s mandate is slated to end, and right before midterms allow voters to decide on the success of the detox plan. Included in our strategy will be guidance to protect and grow your wealth right now.
As always, our research team begins with a basic question: What could go wrong?
Unfortunately, at the moment, the short answer is: A lot.
For starters, this market correction hit a particularly sensitive time.
The S&P 500’s recent 10% plunge marks a challenge for Baby Boomers — many of whom are deep into retirement. They could find themselves liquidating assets at fire-sale prices just to cover living expenses.
The phenomenon is most dangerous when portfolios, already battered, shrink further as assets are sold into a declining market, reducing the ability to recover when conditions improve.
Should this happen en masse, the economy will feel it. And a market crash could be devastating to your portfolio if you choose to do nothing.
And then there’s Gen X, the most financially stressed generation in America.
As they hit 60, they’re being squeezed from all sides — supporting aging parents, financially dependent adult children, and struggling to save for retirement. The cohort that swung hardest for Trump in 2024 is also the least prepared for retirement.
With little confidence in Social Security and personal savings running short, their investment behaviors are shifting dramatically. If the market correction turns into a prolonged downturn, Gen Xers — many of whom have been forced into higher-risk investments to chase returns — could see their retirement hopes go up in smoke.
If you read the financial press, you know the markets are in turmoil, policymakers are manifesting chaos, and the only reliable store of value is the one that has held up for thousands of years.
Meanwhile, you can join a small group of folks sitting under the proverbial thatched roof of sanity. Sip your drink and watch the whole spectacle unfold.
As always, stay sharp. Stay skeptical. Buy gold.
Cheers,
Addison Wiggin,
Grey Swan
P.S. We’ll admit there’s a lot to chew on today. Maybe take the weekend to digest? The Trump admin is moving fast. It’s a good idea to get your ducks in a row.
P.P.S. “Thank you as always,” writes Joan. “I’m loving all the insight and informed perspectives.”
Thankfully, there are appreciative members of Grey Swan. Caryl and Joan, whom I’ve mentioned today, are a few.
For his part, our frequent correspondent CC adds some literacy to our inbox with these comments:
“I couldn’t resist responding to your ‘educated’ critics,” CC writes. “First, Robert:
It’s always amusing to see people compare Trump to Hitler (as if the left is less fascist) or call Trump supporters “uneducated,” as if most people in general are educated or informed. That brings us to an interesting debate on what exactly “education” is.
Is it having a degree which may or may not be useful but being naive and having almost no idea how the real world works? Or is it self-learning and forming your own opinions instead of others forming them for you? As I assume your correspondent has by his mention of those two irrelevant books.
If one does the latter and is still a Trump supporter, are they still “uneducated”?
Or rather, are the real “uneducated” ones people who say things like “tearing apart the govt as if it’s somehow detrimental to our freedom” without sarcasm? I share Robert’s disdain for social media but doubt oligarchs are responsible for most of the “propaganda” there.
“Next,” CC continues on a roll, “your most recent critic:
Why is demanding “fair trade” such an unrealistic goal given the fact the US is already the most tariffed nation? And the US may be the largest consumer market but it’s less reliant on global trade than, say, the EU or China. If tariffs do end up raising prices, they’ll probably end up hurting them more than the US.
I don’t necessarily agree with Trump going straight to retaliation instead of trying to talk first to reduce tariffs as much as possible, but it’s understandable. As for recession, has your critic or the “economists” looked around lately? Things already aren’t great. But who am I to argue with someone who says things like “lead theU.S.S into a global recession”?
Sheesh, when we get our Grey Swan online community organized, I have a feelin’ it’s going to rock.
As always, please send your thoughts to feedback@greyswanfraternity.
