The Best Bet Is That The Economy – And Market – Will Muddle Through
For the last two months I’ve been trying to determine if the rally initially spurred by Trump pausing the Liberation Day tariffs by 90 days on April 9 represents a continuation of the long bull market or a bear market rally. In recent blogs I have mostly focused on bearish factors like rising interest rates, higher tariffs and overvaluation. At the same time I wrote an important blog titled “Why You Should Have A Bullish Bias” (May 17). So where do I stand?
Let’s start with an excellent interview with JPM CEO Jamie Dimon at the Ronald Reagan Presidential Foundation & Institution with Margaret Brennan on Friday May 30. Dimon is the preeminent financial statesman in the country in my opinion. He has ably led the country’s leading bank for two decades and has more insight into the global economy and financial system via his position than anybody else in the world. And Dimon tends to emphasize the things that concern him in the present environment: “the enemy within”, the potential for the bond market to “crack” and send interest rates higher due to the fiscal situation, high asset prices and an inflationary context – the same things that have concerned me in recent blog posts. The entire 34 minute interview is well worth your time in my opinion.
On the other side is the permabull Tom Lee who views us as being in a bull market and has a 6,600 year end target on the S&P 500. On Monday morning on CNBC’s Squawk Box, Lee said he has a year end target for Bitcoin around $200,000 and a terminal value of $2.5 million or higher.
Whose right? They both are in my opinion. Jamie Dimon is right to point out the larger structural challenges that we face. But these won’t matter until they matter. Historically, the market trends higher until a crisis forces a reset. And that’s what Tom Lee gets right: He correctly gives the market the benefit of the doubt as I counseled one should do in “Why You Should Have A Bullish Bias”. The upshot is that the way to bet is that the economy – and market – will muddle through. The investors that have historically made a lot of money are the ones who have held on through thick and thin and that is the way to bet this time as well – even though there are never any guarantees.
