The Most Powerful Force Driving the Market in 2025
Markets continue to defy 'conventional wisdom.'
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Markets are trading higher around the world despite the start of increased tariffs on more than 90 countries and a 100% tariff on semiconductor makers that don’t invest in the U.S. A few months ago, the market was terrified by President Trump's trade and tariff policies, but now they appear to be viewed as a positive effort to realign trade.
That isn’t the only thing the "experts" have gotten wrong. Apple AAPL announced an investment to move a substantial portion of its manufacturing to the U.S. The view of many was that this would never happen because it was far too expensive to operate in the U.S. Apple seems to have figured out a way to do it effectively, and the stock is trading up another 3% on Thursday morning after jumping 5% Wednesday.
The most powerful driving force for the market in 2025 has been the incorrect assumptions of economic experts. The conventional wisdom was that the Trump tariffs would be a disaster that would create substantial inflation and kill growth. It hasn’t happened, but that hasn’t stopped them from predicting that disaster is just around the corner.
Why have so many gotten this wrong? In my view it is due, in part, to a personal dislike of Trump. There are many experts who will never admit that Trump can do anything positive. They stick to the belief that tariffs are a tax on consumers, even though market forces are coming into play that cause margin contraction and competitive shifts.
There is a great likelihood that there will be some increased inflationary pressures as the full weight of tariffs comes into play, but when companies like Apple realign their businesses to such a great degree, there are many positive offsets. The U.S. economy can handle inflationary pressures when there are so many opportunities for increased growth.
Don’t expect the experts to change their minds. They will continue to warn us of the problems that await. At some point, there will be some corrective action in the market, and they will declare victory even though they will never make up all the losses they had accumulated by being wrong for so long.
The indexes are becoming extended again and feeling a bit frothy, but the underlying support has been spectacular. The selloff last Friday on weak employment has been completely forgotten as the focus shifted to the inevitability of Fed interest rate cuts.
The moral of this story is that it is better to focus on technical action than the opinions of economic experts.
At the time of publication, Rev Shark had no positions in any securities mentioned.
