Wall Street: The strategist who saw it, says it is not time to buy

Against the current prevailing on Wall Street after the electoral victory of Donald Trump, which predicted another positive year for US actions, Cembalest positioned himself in the opposite sidewalk. Most Wall Street strategists argued that Trump’s tariff threats were possibly a negotiation tactic and that investors should focus on the president’s growth agenda.

On the other hand, Cembalest considered, at that time, that it would be prudent stock market He recommended anticipating a correction of between 10% and 15% at some point in 2025. “They are going to break something, but I still don’t know what,” Cembalest wrote at that time about Trump and his team, Adinolfi recalls in reference to the prognosis that JP Morgan’s strategist published at the beginning of last January.

In view of the recent events, Cembalest’s skepticism turned out to be prophetic, since, in fact, the volatility he anticipated materialized faster than he expected. But instead of singing Victoria, Cembalest used the introduction of his latest report, published last Wednesday, to remind readers that even someone as powerful as the president cannot control the market. Marketwatch points out: “The interesting thing in the stock market is that it cannot be processed, arrested or deported; it cannot be intimidated, threatened or harassed; it has no gender, ethnicity or religion; it cannot be fired, suspended or definanced; it cannot be subjected to primaries before the next intermediate elections; and cannot be confiscated, nationalized or invaded”.

“It is the definitive voting machine, which reflects the perspectives of growth of profits, stability, liquidity, inflation, taxes and a predictable rule of law,” says Cembalest, who adds that it is possible that the pro-management policies of the Trump administration, such as deregulation and tax cuts, take time to impact the mood of investors. But if the shares continue to fall, Cembalest recommended starting to cut once the S&P 500 has fallen between 12% and 15% since its maximum of February 19. Marketwatch emphasizes that last Thursday, the S&P 500 entered the correction territory for the first time since the end of 2023. A correction is defined as a drop of 10% or more from a recent maximum; In this case, the record closure of the index on February 19. Although the actions were recovered on Friday, the S&P 500 still registered its largest four -week drop since October 2022.

It is worth remembering that days ago, the Secretary of the Treasury, Scott Besent, declared that The US economy needs to go through a “detoxification” Before the long -term benefits of Trump’s agenda can come true. To which Cembalest replied that while he would like to believe that, trusting the administration’s ability to manage the economy could be complicated for some reasons. The Trump administration has already pressed to create a strategic cryptocurrency reserve, an apparent effort to reward an industry that vehemently supported Trump during the campaign. And if Trump seriously talk about reliving the American manufacturing industry, I would not attack with an ax the Biden era chips law.

Cembalest also reminded Trump’s favorite president, William McKinley, to highlight the possible dangers of the administration approach to tariffs, who have helped cause the massive sale of US actions. When they were first introduced, McKinley’s tariffs enjoyed great popularity. But they quickly caused a sudden increase in inflation, which contributed to the republican defeat in the intermediate elections of 1890.

Cembalest says Adinolfi, also questioned part of Trump’s rhetoric around an annual subsidy of US $ 200,000 million to the Canadian economy. After discarding the effect of Canada’s energy imports, Cembalest said that, in fact, the United States maintains a commercial surplus with its northern neighbor. USA It even depends on Canada for Zinc, Telurio, Nickel and Vanadium imports, essential for the industry. And although until now the hard economic data seems to be maintained, a handful of advanced indicators have sent worrying messages: small businesses have cut their capital investment plans, according to a survey of the National Federation of Independent Companies; The inflation expectations of consumers have shot; and the indicator of the Supply Management Institute (ISM) for new orders, less inventories, is again negative.

All these data suggest that the US economy could be directed towards a contractionsaid Cembalest. According to Adinolfi, Cembalest believes that, although it is possible that tariffs on the automotive industry in Canada and Mexico do not finally apply, global encumbrances to other cars imports arrive at an already difficult time for the industry. Production and employment have recently weakened, and there are reasons to expect the situation to get worse, instead of improving, after the application of tariffs.

As for productivity in the American steel industry, Cembalest recalled that it decreased after Trump imposed tariffs on imported steel in 2018, while production only experienced a modest improvement.

Meanwhile, the prices of the washer sold in the US increased after Trump imposed taxes on appliances in 2018. A document cited by Cembalest calculated the added cost for consumers for each job created due to these tariffs and discovered that the public paid US $ 817,000 per employment.