Trump says “eat it or I'll make you an offer you can't refuse” – Gold shines, stocks whine

• And the selling continues.

• Trump tells auto makers to shut up and eat it!

• Eco data remains mixed to better.

• Today’s PCE report is not expected to surprise.

• Gold surges into another new century!

• Try the Christmas Scrod.

Stocks continue to lose ground as some investors, traders and algo’s decide they have had enough……Auto tariffs, lumber tariffs, steel tariffs all reinforcing the idea that a trade war and higher prices are just around the corner. All while Trump reportedly warned U.S. automakers NOT to raise prices in response to tariffs suggesting the White House would view price increases unfavorably and suggested that companies could face consequences if they did so. (Consequences were not defined). This warning came despite the increased costs due to the 25% tariffs on imported vehicles and parts. Now if the automakers are forced to ‘eat’ the higher prices – expect analysts forecasts to change, expect margins to change and then expect valuations to change. I mean you can’t do just one thing…. One action can and will cause multiple ‘reactions’ and that is what will happen. Capisce?

The latest economic data while stronger is mixed….yesterday’s GDP report came in better than expected, while Personal Consumption was a tad weaker, Initial Jobless Claims better, Cont. Claims better, Q/Q PCE Price Index was better, while Pending Home Sales m/m was a bit stronger while y/y they plummeted – falling further into the abyss than expected. So, what to do?

Well - you have several options….you can do nothing, you can continue to buy stocks on sale or you can run for the door…..And like I said – while some run out the door, others are running in the door (for every seller there is a buyer)….the issue? The buyers recognize that the sellers are anxious and so they are happy to take advantage. As a result – stocks lost more ground…the Dow fell 155 pts, the S&P down 20, the Nasdaq down 95, the Russel gave back 9, the Transports lost 8, the Equal Weight S&P down 18 while the Mag 7 gave back 115 pts.

Bonds lost more ground too as the bond market is flashing warning signs about the impact of tariffs on inflation and economic activity. The TLT was down 0.3% while the TLH gave up 0.25%.... leaving the 2-yr yielding 3.99% and the 10-yr yielding 4.33%.

But guess what rose? Not Bitcoin, Ethereum or even XRP…..What was it? Good old-fashioned GOLD. Buyers tripping over each other to ‘get into the safety trade’ …and that sent gold up and into another new century and further into uncharted territory…. This morning Gold is trading at $3,110/oz – leaving it up 17% ytd…. not so bad!

Look – if you’ve been following along with me- none of this should be a surprise…. I have been warning of a weaker first qtr. and ongoing volatility since the end of last year….….and now we only have 2 days until the end of the quarter and I suspect it will get a bit worse before it gets better….Remember – asset managers want to ‘clean up’ their portfolio’s before they send out their end of quarter report cards….and so, it is what it is.

Now that doesn’t mean that on April 1st it will be over….I suspect it won’t…..we still have the actual implementation date of the auto tariffs and the reciprocal tariffs and then we have the start of earnings season on the 11th and then we get hit over the head by Uncle Sam to ‘pay our taxes’ on the 15th….. So, just breathe……this too shall pass – it always does.

Now consensus estimates for the coming earnings season project y/y earnings growth rate of approximately 7.1% for the S&P 500, (that is a reset from the original expectation of 12%). This would mark the seventh consecutive quarter of y/y earnings growth for the index, reflecting a continued upward trend from previous quarters. (up is good!)

Analysts anticipate that aggregate earnings will reach a new high, building on the record levels seen in prior quarters. Revenue growth is also expected to be positive, with estimates hovering around 5% - 6% y/y, supported by broad-based contributions across multiple sectors. So, let’s take a quick look -

Information Technology: XLK – 9% ytd

Expected Performance: Analysts project earnings growth of around 12-15% year-over-year for Q1 2025, with revenues up approximately 10%.

Why: The sector continues to benefit from robust demand for AI-related technologies, cloud computing, and semiconductor advancements. Companies driving AI innovation are expected to post strong results.

Financials: XLF + 3.8% ytd

Expected Performance: Earnings growth is forecasted at 9-10% year-over-year, with potential upside from positive revisions.

Why: Financials are riding momentum from a strong 2024, with banks benefiting from resilient loan growth, improving net interest margins due to a stabilizing rate environment, and potential regulatory relief under the Trump administration. Deregulation could ease capital requirements, enabling more share buybacks and M&A activity, particularly among regional banks.

Consumer Discretionary: XLY -9.4% ytd

Expected Performance: Earnings growth is estimated at 10-12% a year over year.

Why: This sector’s strength is tied to selective resilience in consumer spending, particularly in areas like travel and leisure (e.g., Royal Caribbean Cruises projected at 24% growth). Despite pressures from high borrowing costs, companies with strong pricing power and exposure to higher-income consumers are expected to outperform.

Health Care: XLV +5.5% ytd.

Expected Performance: Earnings growth is projected at 15-17% year-over year.

Why: An aging population (baby boomers) and ongoing innovation in pharmaceuticals drive demand. The sector’s defensive nature makes it less sensitive to economic fluctuations, while strong 1st qtr. pipelines for companies like Eli Lilly suggest robust results. Health Care’s consistent outperformance in beating earnings estimates adds to its appeal.

Communication Services: XLC + 2% ytd

Expected Performance: Earnings growth is anticipated at 10-13% year-over-year.

Why: Growth is fueled by digital advertising, streaming, and telecom investments tied to AI infrastructure (e.g., data centers). Companies like those in the “Magnificent 7” (e.g., Alphabet, Meta) are expected to contribute significantly, with earnings for this group projected at +13.9% for 1st qtr. The sector’s forward-looking earnings sentiment remains high, supported by secular trends in connectivity and content.

In the end – it ain’t all bad…..the ongoing AI boom underpins Tech and Communication Services, with capital expenditure in data centers and software development as major catalysts. Trump’s pro-growth agenda, including tariff implementation and deregulation, favors Financials and domestically focused Consumer Discretionary firms, while potentially pressuring import-heavy sectors.

Sector Rotation: Broader market participation beyond the “Magnificent 7” suggests a shift toward Financials +3.8% ytd, Health Care + 5.5% ytd, Utilities +2.3% ytd, Energy + 8.5% ytd, Industrials +1% ytd and Basic Materials +3% ytd.

Now to be clear - These projections are based on analyst consensus as of late March 2025, but they could evolve with macroeconomic shifts, tariff impacts, or unexpected earnings surprises.

Oil is churning…just below the $70 line…. my sense is that they want to take it up…..but the trendlines will prove to be difficult to pierce….We remain in the $66/$70 range.

On the economic front -

Today brings us the prize at 8:30 am…. – the FED favored inflation gauge – the PCE index…….and that is expected to be unchanged m/m and y/y – so that is a positive. Now if it veers off that path – then we can talk, but otherwise I do not expect it to surprise me or anyone else.

Like I said – futures are a bit lower…. Dow down 32 pts, S&P’s down 4, the Nasdaq down 25 pts while the Russell is up 2.

There are only 2 more trading days in the quarter…. anything could happen…..My guess is that we will see more churn lower….. there is no reason to ‘rush out’ and be an aggressive buyer…. a patient buyer is fine…. April tends to be weaker in the first half of the month – and I don’t think that this trend changes this year.

The S&P closed at 5693 down 19 pts….…but not before we ‘filled the gap’ created on Monday…..5670 for the S&P and 17,799 on the Nasdaq. Further weakness could see us test the March low of 5504 before this is over and honestly that would be beneficial if we did – but we would need to hold……a failure to hold there would put S&P 5400 in the bull’s eye. Something I do NOT think will happen.

Christmas scrod

We call this Christmas Scrod because some Italians have this as one of the seven fish dishes on Christmas Eve – but it’s good anytime of the year.

For this you need - the Scrod (you could use Cod), crushed Ritz Crackers, butter, and s&p. Simple.

Preheat over 400 degrees.

Rinse the fish and pour it dry with paper towels. Season with s&p. Set aside.

Now I melt a stick of butter. Then mix the crushed ritz crackers with the butter and season that too with a bit of s&p. You want them wet but not soaking wet…capisce? (you can also use any other seasoning you like – but I prefer simpler). Now, I also add a bit of parmegiana cheese, but that’s me…. some Italians would balk at the idea of cheese and fish…. but you do you.

Now, place the wet ritz crackers on top of the fish – pat them down making sure that you have it covered. Now place in the oven and bake for 10 – 15 mins…. (depending on the thickness). Then put the oven on ‘broil’ to quickly ‘toast’ the topping. Remove and serve with a lemon wedge.

Avoid overcooking, as scrod can dry out quickly due to its lean nature.