To The Moon

Social Media Influencers Exploit Stock Market Volatility for Clicks

This article is written by Shernice, if you like my article please hit the like button or do a repost.

When the U.S stock market plummeted on monday, numerous social media influencers were quick to predict a market collapse, claiming the U.S. was overvalued and that a bubble was about to burst. Their primary aim seemed to be to attract more viewers by instilling fear in the market. Conversely, when stock prices rebounded, these same influencers were among the first to post, suggesting their predictions were correct and positioning themselves as knowledgeable experts. In reality, they possess little understanding of economics or politics; they merely echo what's already reported in the news, adding no real value.

For those investing in the stock market, it's crucial to be selective about what you read and avoid consuming too much irrelevant or low-quality information.

President Donald Trump initially set tariffs of 25% on imports from Canada and Mexico and 10% on imports from China to take effect on February 4, 2025.

Subsequent Development: There was a deal announced to delay the implementation of the tariffs on Mexico and Canada. Trump agreed to "immediately pause" these tariffs after discussions with the leaders of Mexico and Canada, with the tariffs postponed until March 4, 2025. This pause was to allow for further assessment of whether Mexico's actions regarding border security and drug trafficking were sufficient.

Trump acknowledges there might be some pain involved but believes it will make America great again without worry. Will this lead to inflation? The significant drop in U.S. stock futures, which occurred some time ago, was already reflected in tech stocks. Now, the notable impact on Asian markets is mainly due to these tariffs. Interestingly, the 10% tariff on China is lower than expected, Chinese market rallies. Instead, the focus is more on the 25% tariff increase on Mexican and Canadian goods.

Let's dive into the intricacies of this economic chess game:

The Chessboard of Global Trade: 

China's Flexibility: Imagine China as a nimble player on the global stage. When faced with Trump's tariff threats, China can strategically move its factories to Southeast Asia or even closer to the U.S. in Mexico. This agility in production relocation could keep the flow of electronic consumer goods steady, albeit at potentially higher costs.

Canada and Mexico's Unique Position: These neighbors aren't just trading partners; they're like the U.S.'s kitchen pantry. Canada supplies the U.S. with a hefty share of essential goods - think natural gas (100% of U.S. imports), lumber (70%), and even my favourite frozen fries (80%). This isn't just trade; it's dependency. 

Inflation's Sneaky Rise: With tariffs on Canadian goods like these, expect energy bills and home renovations to get pricier, not to mention next MCD meal. Mexico, on the other hand, is your garden and bar, providing fresh veggies, TVs, and weekend beer or tequila, with import shares from 80% to 90%. A tariff here? Say goodbye to affordable guacamole and favourite Mexican imports.

Trump's Tariff Tactics:

Negotiation Chess: Trump's tariffs aren't just about economics; they're his pawns in a grander game of negotiation. They're designed to be lifted easily - a show of strength and flexibility to the watching world, particularly to Europe and Asia. It's like saying, "We can do this dance, but we lead."

Investment Incentive: By keeping tariffs in place, Trump sends a loud message to countries enjoying a trade surplus: "Invest in us, or pay more to trade with us." It's an invitation to bring jobs and investment back to the U.S., wrapped in the threat of higher costs.

The Fentanyl Factor: Even with cooperation on immigration, Trump isn't letting go of the fentanyl issue. He wants more than just border control; he's aiming for a significant crackdown on this drug, using tariffs as leverage to push for stronger action.

The Big Picture:

This isn't just about tariffs; it's about reshaping trade, investment, and even international policy through economic pressure. As we watch this play out, inflation isn't just an economic term; it's becoming a household reality, one where Americans' next barbecue might just cost more than planned. However, Trump's strategy seems to hinge on the belief that America can pivot back to domestic production, a bold move in this global economic game.

Last Friday, the international gold price broke through $2,800 per ounce, setting a historical high. Many in the industry now believe the next milestone will be $3,000 per ounce. However, Robert Kiyosaki, the author of "Rich Dad Poor Dad," predicts that gold, silver, and even Bitcoin will crash. This divergence in views essentially stems from the market's risk and safe-haven sentiments brewing over time.

This year, although Bitcoin has experienced significant declines, the trend since 2024 has been clear: both risk assets and safe-haven assets have reached new highs. When comparing the two, safe-haven assets have slightly more emotional appeal than risk assets.

US, gold priced in dollars rose by 27%, outpacing the S&P 500's 23% increase.

Germany, gold appreciated by 35%, while the stock market only grew by 18%.

Switzerland, gold prices rose by 3%, while the stock market increased by 4.2%.

China, gold prices increased by 3%, with the stock market rising by just 1%.

Japan, gold prices surged by over 44%, while the stock market only went up by 19%.

This pattern across various markets indicates that people are accumulating gold faster than stocks. Even in a bull market, this cautious accumulation suggests skepticism. Last year, the fear was about recession; this year, it's about uncertainties caused by Trump's policies.

I believe this scenario is very favourable for the continuation of the bull market. 

Why? Because the riskiest environment for a bull market occurs when there's widespread, unchecked optimism; when even casual conversations in local coffee shops revolve around investment choices, trading volumes skyrocket, and only positive news circulates with no anticipation of an economic downturn. This current cautious or tempered optimism actually supports the stock market's health.

Therefore, I see potential for further growth in the US stock market. Trump's negative impact, if any, should be seen as an opportunity to buy rather than fear. Why? Because what fundamentally affects the stock market is corporate earnings. Whether the companies you invest in are making money is what truly matters.

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