The US stock market has been on a wild ride since President Donald Trump took office. The market experienced a significant downturn on Monday, March 10, with Dow Jones Industrial Average (DJI) falling by nearly 900 points, or over 2%, while the benchmark S&P 500 (SPX) dropped around 2.7% and closed down 8.6% from its February 19 record high, shedding over $4 trillion in market value.
The tech-heavy NASDAQ Composite (IXIC) suffered the largest decline, falling 4% on its worst day since 2022, as the “Magnificent Seven” stocks led the sell-off. Tesla (NASDAQ: TSLA) made headlines as it plunged 15% and officially wiping out the gains it had made in the wake of Trump’s election win. Other major tech stocks also took a hit, with Nvidia (NASDAQ: NVDA), Apple (NASDAQ: AAPL), Alphabet (NASDAQ: GOOGL), and Meta Platforms (NASDAQ: META) all losing more than 4% each.
In the crypto space, the market has been equally volatile. Bitcoin (BTCUSD) has fallen by over 15% in the last 5 days as investors become increasingly skeptical of the cryptocurrency’s ability to replace traditional fiat currencies. Ethereum (ETH) also slipped by 19.32% over the same period.
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Is Trump Intentionally Crashing the US Economy?
Analysts believe that Trump’s aggressive trade policies and tweets are intentionally causing the market to plummet. But why would he do such a thing? The answer lies in his desire to kill rates and inflation. By crashing the market, Trump aims to create an environment where interest rates decrease, allowing him to refinance the country’s $7 trillion debt in the next 6 months at a rate lower than 4% compared to the 4.8% seen earlier in the year.
Despite the market downturn, some investors remain optimistic about the future of the stock market and the crypto space. They believe that the market will eventually recover and that the current downturn is just a temporary correction. They also believe that the crypto space has significant potential for growth as more and more people become aware of the benefits of cryptocurrencies. With that in context, let’s take a look at the three good things that could happen as a result of Trump’s plan.
Three Potential Benefits of Trump’s Market Manipulation Plan
Refinancing the $7 Trillion Debt
With interest rates at historic lows, the US government can refinance its massive debt burden and save billions of dollars in interest payments. This could provide a much-needed boost to the economy, allowing the government to invest in infrastructure, education, and other vital programs.
Stocks to Watch
Companies in the Defense and Aerospace sector, such as Lockheed Martin (NYSE: LMT) and Boeing (NYSE: BA) could benefit from increased government spending on defense and infrastructure.
Consumer Savings
As consumers benefit from lower interest rates, it is expected to free up more money for spending and saving. This could provide a significant stimulus to the economy, as consumers account for over 70% of the country’s GDP.
Stocks to Watch
Retail stocks like Amazon (NASDAQ: AMZN) and Walmart (NYSE: WMT) could see increased sales as consumers take advantage of lower interest rates to buy more goods and services.
Averting a Global Debt Crisis
By refinancing its debt and reducing interest rates, the US government may be able to prevent a global debt crisis. As many countries are struggling with high debt levels, a crisis in the US could trigger a global contagion, leading to widespread economic devastation.
Assets to Watch
Cryptocurrencies like Bitcoin (BTCUSD) and Ethereum (ETH) could benefit from a flight to safety as investors seek alternative assets to traditional stocks and bonds.
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What Comes Next?
Quantitative Easing
The Federal Reserve may respond to the stock market crash by launching a new round of quantitative easing. This could help stabilize the market and stimulate economic growth, but it could also lead to inflation and reduce the value of the dollar.
High Trade Volume in Markets
As investors seek higher returns in a low-interest-rate environment, they will turn to riskier assets, such as unprofitable firms, crypto, gold, and commodities. This could lead to a surge in prices for these assets in the short-term future.
Re-Ignition Of Inflation
The stock market crash and subsequent Quantitative Easing could lead to a re-ignition of inflation, as the increased money supply and government spending stimulate economic growth. However, this could also lead to higher interest rates, which could reduce economic growth and increase the cost of borrowing.
Stocks like Goldman Sachs (NYSE: GS) and Wells Fargo (NYSE: WFC) could benefit from the increased liquidity and lower interest rates. Companies like Uber (UBER) and Lyft (LYFT), along with cryptocurrencies such as Bitcoin (BTCUSD) and Ethereum (ETH), could see increased volumes as investors become more willing to take risks in pursuit of higher returns.
Three Potential Drawbacks of Trump’s Market Manipulation Plan
Trump’s plan may seem appealing, but it has consequences, including three significant drawbacks.
Trillions Lost In The Market
The stock market crash has resulted in trillions of dollars in losses for investors, including pension funds, individual investors, and institutional investors. This has led to a decline in consumer spending, as people are becoming more cautious and reducing their investments.
Worsening Job Market
The stock market crash could also worsen the rolling-over job market, as companies reduce hiring and investment in response to the economic uncertainty. This could lead to higher unemployment and reduced economic growth.
Backfiring
Trump’s plan could backfire if the stock market crash leads to a loss of confidence in the economy, causing consumers and businesses to reduce spending and investment. This could lead to a self-reinforcing cycle of decline, as lower economic activity leads to lower tax revenues, which in turn reduce government spending and investment.
Conclusion
Trump’s plan to crash the stock market on purpose to kill rates and inflation is a high-risk strategy that could have significant consequences for the economy. While it may provide some benefits, it has led to trillions of dollars in losses and has worsened the job market. As the situation unfolds, investors should be cautious and prepared for a range of possible outcomes, including quantitative easing, a risk-on trade for risky assets, and a re-ignition of inflation. The crypto space is also likely to be affected, with some cryptocurrencies rising in value and others falling.
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Disclaimer: Wealthy VC does not hold a position in any of the stocks, ETFs or cryptocurrencies mentioned in this article.
The post Trump is Crashing the Stock Market on Purpose — Here’s Three Good Things and Three Bad Things that Will Happen Next appeared first on Wealthy Venture Capitalist.
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