Market Recap: Former Fed President Tom Hoenig On Trump’s Trade War
EQUITIES: Expect a ‘huge plummet’ in all assets, says Chris Vermeulen
EQUITIES: Harry Dent is predicting a 50% market crash this summer
ECONOMY: Matt Piepenburg on why the $300 trillion debt crisis is here
BONDS: DoubleLine’s Bill Campbell on whether bonds are breaking
Latest News. Market volatility this week (April 11th-17th) has cooled, with the VIX down 43 percent from its year-to-date high of 52.33 on April 8th. Traders have been encouraged by rosier outlooks on the White House’s trade war disputes.
The S&P was up 0.5 percent, but the Nasdaq was down 0.4 percent and the Dow Jones traded at 0.9 percent below its week-ago level. The 10-year Treasury yield has recovered slightly, down to 4.3 percent from 4.5 percent a week ago.
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However, the VIX is still near 30, and remains at elevated levels. President Trump has escalated tensions with Beijing, hiking tariffs on Chinese goods to 245 percent, up from 145 percent.
Tom Hoenig, Distinguished Senior Fellow at the Mercatus Center and former President of the Kansas City Fed, said that trade wars historically do not end well.
“We are at risk, around these trade wars,” he said. “I understand the desire to get your trade balance improved, but I think doing it in… a hammer-like fashion is probably short-term in its ability to deliver any real long-term outcomes. You may get some immediate effects, but in the long-run, I think our economy and [China’s] economy, both will be harmed.”
Hoenig predicted that Trump’s trade war escalation with China could impact the status of the U.S. dollar.
“One of the things the United States has to be sensitive to is, it has a huge debt to deal with, and China holds a lot of that, the rest of the world holds a lot of that,” he said. “So how they treat those countries may affect their willingness to hold dollars, and that affects our financing of our own national debt.”
When it comes to the effects of the global trade war on the U.S., Hoenig said that the unemployment rate would rise and a recession is possible.
“It’s like any tax increase,” he explained. “There are a lot of companies that import from around the world, and with higher tariffs their cost of production goes up — the prices go up, demand goes down, they have to lay off [workers]. People’s income falls. It’s a typical recession scenario.”
From April 14-17, the following assets experienced dramatic swings in price. Data are up-to-date as of April 17th at 4pm EST (approximately). Markets closed Friday, April 18th.
United Health Group - down 23.68%
Nvidia - down 11.06%
Tesla - down 6.58%
Apple - down 6.84%
Meta - down 9.83%
DXY - down 0.64%.
Bitcoin - up 1.44%.
Gold - up 2.9%.
10-year Treasury yield - down 0.91%.
S&P 500 - down 2.93%.
Russell 2000 - down 2.77%.
USD/Yuan - up 0.31%.
Doug Ramsey, CIO of The Leuthold Group, said that the market is not near its bottom yet.
“What we’ve seen is the first leg or two down of a cyclical bear market,” he said. “The economy, by many measures, has been growing by rates and exhibiting characteristics that, for a while, we have called pre-recessionary. One example is the slowdown in job growth… The year-over-year growth rate in non-farm payroll employment has slowed to 1.2 percent.”
He explained that there is a close correlation between market returns and the unemployment rate.
“The entire bull market, dating back to October of 2022 through - and I think — the ending was February 19th of this year… took place in the lowest unemployment bucket,” he said. “There’s only been one other cycle like that that we’ve seen historically and it was also very brief and not very powerful, in terms of the total magnitude… The best returns from the stock market generally come after stocks and the economy have been very well liquidated.”
Ramsey said that “the stock market is not sniffing out an economic expansion” this year.
“It’s always been true that asset prices have played a role, not just in anticipating the direction of the economy, but they also play a role in the economic outcomes,” he said. “We’ve had this negative wealth shock we’ve taken in the U.S. We’ve taken the stock market from a little over two times the size of the economy… just two months ago. It went down to 165 percent in a little over a month.”
Chris Vermeulen, Chief Market Strategist of The Technical Traders, said that he had seen bearish signals for the market.
“As a long-term investor, you don’t want to be holding stocks in general,” he said. “When the tide goes down, almost all stocks go down with it. In fact, during a bear market in equities and an economic downturn, almost everything goes down, and sometimes cash is a play. You want to get out of pretty much most other assets.”
Vermeulen said that he expected a “huge plummet” in all assets.
“I believe this so-called dead cat bounce, that I believe in, is going to be a bunch of bars of the market… just trading sideways and slightly higher,” he said, pointing to his charts. “And then eventually, it’s going to roll over and break this neckline. And when it breaks the decline, that is when we see a huge plummet.”
Using the pandemic-era market lows as a benchmark, Vermeulen said that he foresaw an S&P pullback of up to 30 percent.
“We could see a pullback to 4,600, all the way down to 4,100,” he predicted. “In reality, from the ultimate highs, we’re looking at about a 25 to roughly 30 percent pullback.”
However, Vermeulen said that in a worst case scenario, the market could crash by up to 55 percent.
“This is a big pullback, but it’s very similar to what we saw back when the tech bubble burst, the financial crisis burst,” he explained. “We’re going to have something else burst, whatever it’ll be this time, but there is a lot of downside.”
Harry Dent, Founder of HS Dent, said that he expected a 50 percent pullback in the market by this summer, due to trade war fears.
“I’ve analyzed every bubble in history,” he explained. “40 to 50 percent is typical in the first two to four months, that first crash — and that’s what I think we’re likely in.”
He explained that the stock market had been buttressed by fiscal and monetary stimulus, which had artificially inflated asset values.
“We had the greatest boom in history,” he said. “They’ve just been printing money and running huge deficits… I mean, the economy is pretty good [but] it’s good because they poured $27 trillion in it, which by the way, when I compare that to GDP, would’ve been enough for us to grow just on the stimulus at 6 to 7 percent a year.”
Dent said that President Trump’s tariffs are the “perfect trigger” to deflate the stock market bubble he said had been growing since 2008.
“We need to see a crash,” he said. “I expect… that this first crash takes us down, into the summer, 50 percent from the top on the Nasdaq and QQ Nasdaq 100, and 40 percent on the S&P 500. So my message is, folks, it makes sense to sit through most corrections. This is not one of them.”
Long-dated treasuries are likely to perform well during the crash, said Dent.
“It’s the treasury bonds that do the best in the end,” he said. “In 2008, it was TLT that rallied 40 percent in the second half of 2008… I tell people to be in treasury bonds instead of cash, because they will tend to go up modestly at first in a downturn, but when it really gets bad, as bad as I’m thinking, they do better and nothing else.”
Matt Piepenburg, Partner of Von Greyerz AG, said that the U.S. is currently facing a debt crisis.
“We have a debt crisis,” he said. “… We are at unprecedented debt levels. We are running out of options. We’re in so much debt, we can’t inflation by raising rates because we can’t afford our own rate hikes, and we can’t even organize or initiate a trade war.”
When it comes to the trade war, Piepenburg said that its success hinges on how patient the American public are.
“It’s a laudable and long-term goal… We definitely need to re-shore manufacturing,” said Piepenburg. “Will the American voter population and small businesses be able to wait that long? That’s to be determined, but I think China and the BRICS and others are going to find ways not just to retaliate, but to get creative and not need America as much anymore.”
Piepenburg said that the world is becoming increasingly multipolar, and that this would affect economic relations between countries.
“China… if they’re hit with 145 percent tariffs from the U.S., obviously that market is shut down to them, so they’re going to retaliate,” he said. “They’re going to go to other trading partners, they’re going to look to [the] EU… There is dysfunction coming: alliance, trust with the U.S, the EU just saw a temporary 20 percent tariff.”
Steve Hanke, Professor of Applied Economics at Johns Hopkins University, said that recent economic events, such as the U.S.’s slowing money supply growth and escalating trade tensions, are similar to the lead-up to The Great Depression.
“[In] the Great Depression, you had a two-stage thing,” he explained. “The money supply started to contract, the economy starts going in the tank — and then you had the Smoot-Hawley Tariff… but I don’t think it’s as bad as what Trump is doing. The [Smoot-Hawley tariff] rates weren’t as high, and they were much more certain.”
Hanke said that a recession is likely to occur, due to the slowing money supply and higher tariffs.
“The Trump tariff… is really throwing a lot of sand in the gear,” he said. “That will just make the slowdown even worse and probably we’ll have a… technical recession.”
Because of policy uncertainty, there had been a failed treasury auction, which caused Trump to pause his tariff hikes, said Hanke.
“Usually, primary dealers and foreign central banks buy around 15-16 percent of each one of the supply of treasuries at the auction,” he explained. “This week, they bought like 1.5 percent only. And within minutes after that, Trump called for a 90-day pause in the tariffs… That auction failure, it was a complete failure. And I’m certain Scott Bessent, the Secretary of The Treasury, pressed the panic button.”
Bill Campbell, Portfolio Manager for DoubleLine’s Global Bond Strategy, said that there is a shift away from the U.S. dollar dominance, and towards a multipolar financial system.
“Due to a large political shift… we had wealth inequality reaching historic levels and we’ve seen strong polarization of many political parties, not just in the U.S.,” he said. “The net impact of that has been a move towards more protectionism, and the U.S. stepping back from its prior position as a global leader as far as providing security guarantees, and also the free exchange of the U.S. dollar.”
He identified the 2022 sanctions on Russia and expulsion of Russia from the SWIFT system as a watershed moment in the shift towards the multipolar world order.
“When the U.S. sanctioned Russia… and pull them off of SWIFT, froze their FX reserves, and really weaponized the U.S. dollar based financial system, that kind of started this move,” he said. “But… the protectionism and trying to adjust global supply chains is now speeding this process up.”
When it comes to asset allocation, Campbell said that investors should be cautious about policy uncertainty.
“For the near term, the outlook is highly uncertain,” he said. “You may have to wait a little bit for the front end of the curve trade to play out, but I ultimately think the belly to the front end — we should be reducing duration in portfolios.”
Doomberg, Head Writer of , said that oil prices will fall to $50 per barrel under the Trump administration.
“Oil is going to $50,” he said, commenting on the recent downward movement in oil prices. “Trump wants $50 oil. The Saudis have agreed. There was clearly a deal with OPEC [The Organization of Petroleum Exporting Countries]… In my view, it’s the end of OPEC as a functioning cartel that has the ability to manipulate crude oil prices higher.”
Doomberg said that The White House had likely negotiated a deal with Saudi Arabia and Russia to allow for lower oil prices, sidelining other OPEC countries in the process.
“Russia, Saudi Arabia, and the United States have been engaged in high-stakes diplomacy for weeks,” he explained. “Those are the three largest oil and gas producers in the world… Something was decided behind closed doors… and I think Saudi Arabia put the knife to OPEC.”
However, Doomberg was skeptical of Goldman Sachs’s prediction that oil could crash as low as $40 per barrel in an “extreme” scenario. He said that this could only happen if there is a regime chance in Venezuela, which has some the world’s largest proven oil and gas reserves.
“[Venezuela] used to produce 4 million barrels a day,” he said. “It barely produces 1 [million] today. With the most advanced technology of the Chevrons and the super majors are assembling right next door in Guyana, if we see a regime change [in Venezuela]… that would be pretty bearish for oil prices.”
He added, “We are not condoning [regime change]. We don’t think this is the proper practice of foreign policy. There’s all manner of ethical issues and national self-determination issues but those have never mattered in the past [to the U.S.].”
Matt Sigel, VanEck’s Head of Digital Assets Research, said that Bitcoin could reach $180k by Q4 of 2025.
“Assuming that Bitcoin can get through this period of uncertainty, which we think is macro-driven, interest rates [will] come down, the Fed gets a little easier, [then] we think the second half of the year should be quite positive,” he said. “Bitcoin could reach $180k per coin.”
Sigel explained that his price prediction was grounded in prior patterns of Bitcoin price movements.
“[Previous Bitcoin cycles] have tended to get smaller over time,” he explained. “The previous smallest Bitcoin cycle was a 20X return from the trough to the peak. If we can do a 10X return this cycle, that would imply $180k.”
In terms of a medium-term outlook, Sigel said that Bitcoin could reach as high as $450k per coin.
“We benchmark Bitcoin against gold, specifically the 50 percent of the gold market that is more speculative in nature,” he said. “If Bitcoin can reach the 50 percent of gold that’s speculative in nature, that would imply roughly $450 per coin… That could be maybe a 2027 [or] 2028 [target of] $450k per coin.”
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