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Transcript
Hello, everybody. This is VJ Arjan, CEO of with your market update, where we’ll dive into some, you know, latest trends, news or the events that you probably have noticed lately, key metrics, and frankly, significant movements in the financial landscape. And honestly, whether you’re an investor, an analyst, or just simply curious about the economic pulse, I do hope this update will provide you with some actionable insights to navigate the truly ever changing changing market environment that we have today. And we’ll cover some pretty important topics. I do wanna highlight, there are some emerging opportunities, but frankly, I do see a lot of potential challenges ahead.
And so that’s why I have titled this, spark it up, they buckle your seat belts, which I think is apropos. So let’s get started and unpack today’s market story. So there are I mean the word that comes to mind, these days is the word uncertain. There’s a lot of uncertainties and today I’m gonna delve into four major uncertainties. The first one is definitely the tariff policy, the Trump administration’s tariff policy.
The second one is the DOGE layoffs or the Department of Government Efficiency layoffs. The third thing is how that relates to current market valuations. And the last thing is the, I mean, ever increasing increasing geopolitical uncertainty, geopolitical instability. So we’re gonna dive into these, in detail here. So before going to tariffs, I wanna bring up, something that my friend Warren Buffett said in a recent interview.
And in in discussing tariffs, he talked about basically three things. That one is, guys tariffs are an economic act of war. That’s basically what a tariff is. And two, the tooth fairy does not pay for them. K?
As you’ll find out here, China’s not paying for them. Mexico’s not paying for them. Canada’s not paying for them. We Americans are paying for those tariffs. And the third thing, and this is a question that I think honestly any good investor or economist should be asking is, and then what?
So unpacking tariffs. Right? So who will the tariffs affect? And if you’ve been paying attention to the news, the Trump administration’s already levied tariffs on several countries. So far, it’s been Mexico, Canada, and China.
And the point of a tariff is basically this. So tariffs are not always a bad thing. The government has used tariffs throughout our history. But oftentimes, they’re basically a tax on imported goods, and that’s to shore up domestic industries and to give domestic industries a competitive edge.
And, of course, you know, tariff is a tax and that generates revenue for the US government. And it also is used to gain leverage in trade negotiations, which is, by the way, what we thought these tariffs were gonna be. Just a way to leverage and re redoing some of these trade deals that we have with different countries. But I think we’re finding out that the impact can be quite multifaceted, and it can ripple through the various sectors of the economy in in really unforeseen and, like, almost damaging circumstances. So if argument’s sake, the tariffs are used to onshore.
So we have foreign companies. I don’t know. I’m just giving an example. Honda, Toyota, and we say, listen, guys, if you wanna make cars here in America, we won’t there are no tariffs. If we have to import them from you in Japan, they’re gonna be tariffs.
Okay? So that’s a way for on-shoring companies to America and essentially creating American jobs. So the problem is, it’s all well and good if they onshore in a reasonable amount of time. But if they don’t onshore in a reasonable amount of time, and they delay because the policies are changing one day to the next, then guys, the end result is that we just pay higher prices. Right?
That’s the end result. American people just pay higher prices. We don’t even get the jobs. We just pay higher prices. Businesses pay higher prices, and of course, the businesses that they tack on the tariffs, the government tax on the tariffs, but then eventually those tariffs, they get passed on to us, the consumer.
And so the the concern that I’m that I have at least is that the way the tariffs are being levied could reduce purchasing power and essentially slow economic growth. Now the other thing that’s happening, which is once again an unforeseen, but is happening, is to put it plainly, we’re pissing off a lot of our friends and allies. And the strain is becoming noticeable. And that our trading partners instead of moving their factories here are starting to look elsewhere.
So for instance, I give an example. Canada is starting to look at the EU for instance, and even China as trading partners and starting to rely much less on America. And guys, that’s a net negative for us. Right? I mean, that’s global supply chains being disrupted.
That’s a net negative for us. So this is just an uncertainty. This is an uncertainty for businesses. This is an uncertainty for investors. And the long term implications is something we don’t really know yet.
So now this leads me to what’s happened the last month or so. Because of that uncertainty, we’ve had a sell off in the market. It’s been pretty sharp and pretty steep. Doesn’t happen very often. Corrections happen all the time.
It’s nothing crazy. But this one is a little bit of oomph to it. Okay? And I think a lot of this is because of the uncertainties. Because investors, they don’t want uncertainty, so they’re not sure how to navigate this environment.
And so we had a day in the last month or so. The Dow was out a thousand points roughly in a day, and that’s the most since 2022. The S&P was down 4%. That day, the s you know, the the I mean, the Nasdaq was down 4%. The S&P was down 3%, and the S and P is in correction territory at this point.
And of course, thank goodness, we made the right moves. As you guys know in this little green area here, this little box that you’re looking at, we made a lot of de risking adjustments from across our client portfolios. So we’re not down anywhere near what the market is down, and that’s just because I just thought maybe this is there’s more going on here than meets the eye. And so the market is down, and it isn’t really bouncing that much to be honest. And so the question is, kind of what happens from here?
And I will say, you know, it’s hard to predict things, but if if we stay on this road, and we live with the if he continues levying the tariffs and we continue having this trade war, things could get ugly. K? Things could get really ugly. I mean, I’m thinking of the stagflationary environment in the seventies. The S and P fell 50%, five zero.
And I mean, because of our risk management strategies that I have in mind, I’m hoping that we don’t ever participate in that. But, obviously, with those extreme sell offs, a recession and a rising unemployment is like a given. It’s it’s it’s gonna happen. Speaking of unemployment, this is another big uncertainty for me, the Department of Government Efficiency.
I mean the layoffs is once again right, I’m not saying that there isn’t wasteful spending in every government. There is wasteful spending in every government, okay? The problem is not that. The problem is the way in which this is happening. Right?
If Elon haphazardly just fires 80,000 people from the veteran Veterans Administration, Are those 80,000 people gonna be given a job in the private sector? Is the private sector gonna be able to absorb those displaced jobs? Right? If it’s done gradually over time, I think it can be done. But just mass layoffs, thousands and thousands of people just boom, gone.
If if the private sector can’t absorb it, if the private sector cannot absorb these layoffs, what that basically means is these people, they start they stop paying their bills. They stop paying their bills. They stop paying their bills. They stop paying their They stop paying their mortgages. They stop paying their car payments, and then banks freak out.
And when banks freak out, they’re gonna restrict credit. They can tighten up. And then what happens eventually is a recession comes. I mean, this is what happens.
The other thing I want you to consider is that the Trump administration is advocating for a $4.5 trillion tax cut that benefits essentially the wealthiest percentiles in our country. And just to give you some some yardstick here, we already have a $2.2 trillion deficit. In other words, the government revenue versus expenses, it’s already $2.2 trillion. So on top of that, if there’s a $4.5 trillion tax cut, that means $4.5 less money coming in. Right?
That money’s got to come from somewhere. And unfortunately, at least what the the proposed budget is from the GOP in the house is that they’re gonna cut from things like Medicaid. $800 billion off of Medicaid. This has 35 million people who are poor and sick, who can’t pay their bills. This is this could get ugly.
This could get ugly. I mean, the ripple effects is what I’m talking about here. Right? You gotta think of the long term, what Warren talked about. Right?
And then what? So you gotta think and then what? Now none of this even takes into consideration that the current market valuations have been sky high for a while now. And to give you some statistical measure, the S&P is priced at two standard deviations. So in layman’s terms, it’s in the top 2% of its entire historical valuation range going back to 1870.
Okay. So we’re at the top 2% of valuations right now. And I don’t know for you, but for me, price matters. Price matters. And even if your neighbor’s getting rich, I don’t care.
Prices are sooner or later going to come back to earth. And given all the risks that we’ve been facing recently, you know, the risk of a sell off is pretty high. And another thing I wanna mention is that the AI trade is being questioned because just a quick story. So, you know, we NVIDIA creates these chips that basically power artificial intelligence and OpenAI and, you know, Sam Altman, supported by Microsoft, have basically spawned all these new, different programs out there. We have ChatGPT, of course, and then we have Microsoft’s Copilot and things like that.
Well, they’re using NVIDIA’s chips, which are latest and greatest and all this other stuff. Okay? NVIDIA spent tens of billions, OpenAI is spending to run their platform. And then, if I’m not mistaken, in February, a Chinese platform, a Chinese AI platform called DeepSeek came out, and allegedly, they spent $7 million to create something really close, really really really close to OpenAI ChatGPT Copilot. So tens of billions versus $7 million.
Now we can say, okay, maybe the Chinese government helps some and maybe it’s closer to a hundred million, but still, it’s significantly less. And I’ve I’ve tried DeepSeek. And I, you know, I mean, I’ve tried the different platforms. And other than a slight time delay, I really can’t tell the difference between DeepSeek and some of the other AI. And and so that really comes to the question of, is Wall Street getting ahead of their skis when it comes to profitability?
Because that’s what it’s about to investors, and for us, it’s about, you know, profits. Investor profits, S&P profits. How is the AI thing going to affect a, profitability down the line? So once again, another question mark, another uncertainty.
Now the final thing that I wanna address is the geopolitical risk that we face today. And my awareness of these risks, I would say they grew a lot in the last five to seven years. Back in the day, I was a China bull. You know, I think they still have some amazing companies in China, but the Chinese Communist Party’s policies caused a severe bear market in the Chinese equity market in the past five, seven years. And so it’s made me think more about geopolitical risk, and given what the current administration is doing, and their rhetoric frankly, I mean, it’s really becoming front and center for my mind.
So, like, for instance, right, when he refers to Canada as a fifty first state and suggests that he wants to seize the Panama Canal by force and proposing to annex Greenland, which is a Danish territory, and turning the Gaza Strip into the quote the Riviera, the Middle East. At best, this is disruptive, and at worse, it’s reckless and incredibly immature. Immature. And on top of that, right, aligning The United States with Russia, who I can’t imagine they’re an ally, and and saying, well, we’re hinting at leading NATO. This is shifting the world order very, very quickly.
And, you know, you get the argument. I I’ve heard the argument. Oh, well, you know, we gave $300 billion to Ukraine. It’s actually closer to $180 billion over three years. But here’s the thing, right?
Geopolitics is about risk and reward. You really have to look at it like risk and reward. And if $60 billion per year, which is less than 1% of the total federal budget, if that was stopping Vladimir Putin from steamrolling across Europe, isn’t that a bargain? Like, that’s what I’m thinking to myself. Like, how does it help us, America, to align ourselves with Russia?
So once again, very irresponsible rhetoric, and decisions being carried out so far by the Trump administration, and they will have profound consequences since front and center to me is this thing right here. This thing right here is what it’s all about. I mean, to me, we have a tremendous standard of living mainly because we are the US dollar is the world’s reserve currency. Now if we keep pissing off our allies and they say, well, you know, we’re not gonna use US dollar anymore.
We’re gonna use a euro. We’re gonna use something else. That just means domestic inflation. That means higher interest rates for all of us, and that means diminished economic and political leverage. And, you know, as we’re growing more and more isolationist, if this continues, once again, he can course correct.
It’s not over yet. But if he if this continues and we grow more isolationist, more and more of the companies are gonna be affected. You know, I think what a lot of people and this is something I’m not hearing a lot these days. The the this is something I’m not hearing a lot these days. The the world’s reserve currency being at risk is something I’m not hearing a lot these days.
The other thing I’m not hearing is that 30% of the S&P 500’s revenues come from international markets. 30%. That’s not a small amount. So once again, I mean, I fully admit maybe I’m not smart enough to see what’s happening. You know, maybe he’s playing four d chess and I can’t tell.
And I’ll be the first to admit it if I’m wrong about this whole thing. Maybe President Trump is a genius. And then again, maybe this is incredibly, incredibly reckless on his part. And I’m not trying to make this political. I’m just trying to be level headed here because I care about making sure you guys retire on time.
And so far, it’s been a lot of rhetoric. Okay? But initially, the tariffs were rhetoric. And we just thought, oh, he just wants to renegotiate trade deals, and guess what? The trade war started.
So we have the slew of tariffs and retaliatory tariffs that are about to happen on the April 2nd. I don’t know. We’ll see. Maybe everything gets averted last minute, and it’s just good times ahead of us. Then again, maybe it isn’t.
And to me, I really, really wanna ask us to ask question, and then what? Because we do face some uncertainties, ahead. And it’s gonna cause I mean, it could cause some real problems for us. Now I don’t want us to participate on the downside. So anyway, in closing, I wanna just just mention three things.
The economy is in a fragile state, and I still think that the main culprit is not being addressed, whether it’s by Wall Street or by the folks in Congress. Wealth inequality is still the major issue. Giving tax breaks breaks to the rich is not gonna help that. People are still struggling out there.
And we still have to see, are the tariffs going to cause that inflation? Because it should. Technically, I mean, I don’t know how we avoid it unless he course corrects. And then the final thing is, you know, this fiscal crisis does have to get sorted out. I think that’s a very reasonable thing to look at.
Our debt situation is out of control. But I don’t think cutting entitlement programs like Medicaid is going to help us getting there. And I don’t think giving tax breaks to the very wealthy is gonna help us getting there. I really think that’s a recipe for disaster, and I think a telltale sign for me would be if the bond market actually pushes back and you see yields start to go up. It’s possible, guys.
I’m not saying it will happen, but if that’s what happens, yields could actually go up from here. And the bond market is like, nope. Not not interested. But anyway, this is once again subject to a course correction. If the course course correction comes about by the Trump administration, and we could be looking at a complete reversal of what we have today, and then we have good times ahead potentially.
So anyway, that’s all for now. Thank you so much for watching. And if you’re interested in becoming a client here at ConCap®, go to concapadvisory.com forward /free consultation. One important thing to note, now we used to have account minimums and a mandatory financial plan, and we basically scrapped that. You know, we have situations where very, very young people are trying to become clients, and I don’t think it makes sense for them to have a financial plan and account minimum.
So anyways, the bottom line is the barrier to entries are completely gone. If you’re new here, you know, welcome. Client here, send over your friends and family. But we we definitely have some challenges ahead. And I just love navigating those challenges for you guys.
And I thank you for your continued trust in letting ConCap® manage your financial situation for you. So, anyways, that’s all for now. Be good to another. Be kind to another. Be authentic and intentional, and I’ll see you next time.
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