Louis’ reaction to Liberation Day … mixed signals on the inflation front … what’s the risk of stagflation? … a way to trade earnings season as the markets remain volatile

In the wake of President Trump’s “Liberation Day” tariff reveal yesterday, the investment markets are in freefall.

Yesterday afternoon, the President unveiled a sweeping tariff plan that was far greater in scope than markets expected.

While Trump finally brought the clarity the market wanted, the “clear image” that investors now see is a potential tariff war that risks stunting economic growth and corporate profits.

As I write, we’re seeing panic selling across the board.

From stocks… to gold… to crypto… to commodities… to the U.S. dollar… everything is falling – except bonds.

Investors are fleeing to the safety of the 10-year Treasury, causing its yield to plummet. As I write, the yield has fallen 17 basis points, putting the 10-year at 4.02%, its lowest level since October.

Please resist the temptation to join in the panic

Market sell-offs are a natural part of investing, and volatility is something every investor must endure.

Long-term success comes from discipline and patience. Great opportunities arise in downturns, and those who stay the course will ultimately build lasting wealth.

Remember, just a few months ago, the market was at an all-time high. It will be again, eventually.

Now, that doesn’t mean you might not want to adjust your portfolio based on yesterday’s news. But even if so, we urge you to do so based on cool-headed logic, not hot-tempered emotion.

To help you with this, our Editor-in-Chief and fellow Digest writer, Luis Hernandez, sat down with legendary investor Louis Navellier this morning.

They discussed the market turmoil, what happens next for the U.S. and international manufacturing sectors, how today’s market reaction is irrational, and why Louis remains bullish on his stocks.

To watch, just click here.

As Luis highlights in the video, for the exact stocks that Louis is buying in this market selloff in his Accelerated Profits newsletter, click here.

If you’re less familiar, in Accelerated Profits, Louis zeroes in on high-growth stocks poised for rapid price appreciation. He uses his proprietary stock-rating system to focus on top-tier stocks exhibiting exceptional fundamentals and strong momentum.

In a volatile market, you want to be in the strongest fundamental stocks – exactly what Louis does in Accelerated Profits.

Shifting gears, we’re getting mixed signals on the inflation front

By some measures, inflation is cooling rapidly. I’m even seeing the dreaded “D” word (deflation).

For example, as you can see below, Truflation, an independent inflation index, reports a U.S. inflation rate of just 1.39%. And notice its downward directional trend since late-December.

Louis is already pointing toward deflation in the global economy:

While the foreign financial media has promoted the narrative that tariffs are inflationary, deflation has already emerged.

In fact, China has reported widespread deflation in virtually all categories.

Consumer prices fell into negative territory in February and wholesale prices have been stuck in negative territory for more than two years.

I should also add that the U.S.’s trade deficit has soared as goods were “dumped” in the U.S. to try to beat the impending tariffs. These excess goods are not expected to be discounted, and that could further spread the deflationary forces that have recently emerged.

So, the world economy is at risk of slipping into a deflationary spiral.

On the other hand, recent data from the Consumer Price Index (CPI) and the Personal Consumption Expenditures (PCE) Price Index show pressure on prices remaining firm.

The latest core CPI inflation data (which strips out volatile food and energy prices) found that prices climbed at a 3.1% pace year-over-year. Similarly, the most recent core PCE figure climbed 2.8% year-over-year, up from the prior reading of 2.6%.

Which direction will inflation break? Up or down?

Let’s factor in the new tariffs from President Trump

These new levies are expected to increase company production costs, which they will likely pass on to consumers.

Translation – higher prices.

Last week, the Federal Reserve Bank of Richmond published a report titled “How Might Fifth District Firms React to Changing Tariff Policies?”

From that report:

To the extent that firms are not able to find non-tariffed suppliers, results from our February surveys suggest that firms would pass unexpected cost increases on by increasing the prices they charge customers.

Nearly three-quarters of respondents reported that they would increase prices if faced with an unexpected cost increase, and nearly 60 percent would pass through the full amount or more.

The extent of price pass through will likely depend on the magnitude of cost increases from tariff policy.

And what if consumers rebel and don’t want to pay those prices?

Normally, lower demand would result in lower prices, but that’s not necessarily true when tariffs are in play.

That could leave us in an environment characterized by high prices and low growth – also known as stagflation.

On a call earlier this week, our Editor-in-Chief, Luis, made a prediction…

Get ready to hear a lot about stagflation.

I think Luis’ call is spot-on.

In fact, it’s already happening…

Last month, a Bank of America survey of global fund managers found that 71% of managers expect global stagflation within the next 12 months.

Meanwhile, earlier this week, Citibank echoed this sentiment in a note to clients:

Looking out, large tariffs would move us closer to the stagflationary risks we have downplayed this past year.

This transition happens through a tightening of financial conditions which means fixed-income returns also turn negative.

The note modeled a base case of 10% tariffs, which they predicted could push the economy into stagflation in roughly six months. And with 20% tariffs, Citi predicted we’ll see an added “growth shock.”

Well, yesterday’s tariff details revealed far larger tariffs than 20% for many trading partners, so “growth shock” could be in the cards.

B of A and Citi aren’t the only Big Banks that have raised their stagflation predictions. We’ve seen similar calls from Goldman, Stifel, and UBS.

Behind these predictions are weakening economic data alongside rising prices. On that note, here’s Reuters on Tuesday:

An Institute for Supply Management index of manufacturing activity fell, but its measure of prices paid by companies rose.

“The manufacturing sector is showing the first signs that stagflation may be coming for the broader economy,” wrote Inflation Insights President Omair Sharif, noting the price measure in the survey rose at the fastest pace since mid-2022.

Considering this risk, many concerned investors are grappling with a question…

But what about AI, growing earnings from tech, and the timeworn investment truism that “time in the market” is more important than “timing the market”?

We’re suddenly facing a difficult fork in the road…

Do we stay in the market, giving the benefit of the doubt to the bulls, hoping Trump tariff negotiations (and lower tariffs) are close at hand?

If we choose this, we risk serious losses if a worst-case scenario plays out. As we covered earlier this week, Goldman Sachs pegs a worst-case tariff-related market drawdown at 50%.

Or…

Do we sell down our big winners, swallow the capital gains tax hit, and rotate into safer investments, voting to emphasize “defense,” protecting the gains we’ve generated?

If we choose this, we risk the tariff drama resolving in the coming weeks, and the market screaming higher. The potential missed gains could materially impact the timing of achieving our retirement timing and/or financial goals. Plus, that FOMO could be brutal.

Not an easy choice.

Given this challenge, one solution is adopting a “trading” mindset today.

In other words, rather than adding to your buy-and-hold portfolio as questions swirl, put your money into attractive short-term trading opportunities.

This reduces your overall market exposure if you’re wrong, while giving you exposure to market gains if you’re right.

Let’s profile one way to do this…

We’re less than two weeks away from Q1 kickoff when the Big Banks report

This has traders gearing up.

In the long-term, earnings drive stock prices. But in the short-term, surprises to expectations are what move the needle. And few things deliver more consistent investment surprises than earnings seasons.

Is there a way to get a bead on surprises ahead of earnings and benefit from them?

The answer leads us to Andy and Landon Swan, the analysts behind our corporate partner, LikeFolio.

Each Sunday during earnings season, Andy and Landon publish a comprehensive list of all the companies they track that are reporting earnings in the week ahead.

Each company is assigned an Earnings Score from -100 (bearish) to +100 (bullish), with scores near zero being neutral. They also put out a recommended trade that they hand-select from a variety of strategies that offer super short “risk windows” of just five days.

Here’s Landon with the goal:

Get in on Monday, get out by Friday, collect your cash, and enjoy that weekend.

This is especially attractive considering today’s stagflation and tariff concerns.

***But anyone can issue trade recommendations during earnings season, why is this different?

Consumer data.

Back to Landon:

Often, we know in advance what companies are going to say [in their earnings calls and with their earnings reports].

How?

Because we’re listening to their customers on social media and watching their web traffic patterns.

Are they buying more?

Do they love the product?

Are they going to the website more?

Are they searching for alternatives?

LikeFolio’s Data Engine captures and analyzes millions of data points from across the web every single day to spot shifts and trends in consumer spending behavior on Main Street before they become news on Wall Street.

All these data points give Andy and Landon critical intel on publicly traded companies straight from the source that matters most – the consumer, whose spending powers nearly 70% of what happens in our economy.

If we go by their trade results, the approach is working

Andy and Landon offer a variety of trades that fall at different points along the risk/reward spectrum. Some more aggressive trades have higher “average gains” but with lower “win rates,” while other more conservative trades produce lower “average gains” but higher “win rates.”

Across all their trading styles, the average return is 16.9%. And remember, that’s targeting a one-week hold period.

To learn more about how Andy and Landon trade earnings season, click here to learn more. They’ll show you what they call “the single most powerful trend that will drive earnings surprises this quarter” and give you their top-ranked opportunity – ticker symbol and all.

Now, this isn’t the only way to generate quicker returns in the market. Tomorrow, we’ll profile another strategy from Louis.

Most important, please maintain perspective on today’s selloff

Market downturns are inevitable, but they don’t define your success – your response does.

Emotional decisions often lead to costly mistakes, while patience and discipline pave the way for long-term gains.

Stay focused, trust your strategy, and remember that wealth is built over time.

Have a good evening,

Jeff Remsburg