Yesterday, the market stopped falling. Today there was a nice rally that petered out in the afternoon due to ongoing tit for tat news regarding China tarriffs. Trump says he will enact a 104% tariff on China. That’s absurd, of course.
But it caused China to dump U.S. treasuries both to raise money for an ongoing trade war and to demonstrate its ability to do so. The 10-year treasury rates surged higher.
Horn Blower
In a video we recorded on Sunday, I said there would be a rally early this week, and there was. I fully expect that the rally will continue until the gap at 5,400 on the S&P 500 has been filled.
Gaps Get Filled
Protectionist
Trump is serious about his tariffs. Last spring I was invited to Mar-a-lago and listened to a speech from Robert Emmet Lighthizer, who was Trump's trade representative during his first term.
I had a chance to chat with him after the talk about some of the very protectionist ideas that are happening today. Lighthizer lived through the destruction of the Midwest Rust Belt. He saw formerly prosperous towns like Gary, Detroit, and Pittsburgh get destroyed by globalization.
He believed that free trade ruined millions of middle-class families and countless communities. If you lived through the late 1970s and early 1980s, you remember that the parade of closing factories and the detached wistful look of young mothers who didn’t know what the future held was a daily occurrence on the nightly news.
It was bad
From 1970 to 2022, the number of steel workers declined from 650,000 to 142,000. Auto workers declined in population from 350,000 to about 230,000 today. In the 1960s Detroit had the highest per capita income in the country. By the 1990s, it was the definition of an urban wasteland.
No one knows to what extent Trump thinks he can bring this lost world back, but it looks like he will give it a shot. Now, I’m not a political pundit. I don’t have a dog in this fight. I’m an investor and trader.
My goal is to make you money by recommending stocks that have a good chance of going up in value.
And right now, given this new world reset, one place you should put your money is into companies that will benefit from U.S. protectionist measures. The Trump team wants things to be built in America. Things like autos, ships, bridges, and factories.
For these, you need steel.
Trump's tariffs primarily seek reduced competition from foreign steel imports and the potential for higher domestic steel prices.
Trump’s tariff policies, including a 25% tariff on steel imports and a 10% baseline tariff on goods from all countries (with higher rates for specific nations like China), aim to protect American industries by making imported steel more expensive.
This creates a competitive advantage for domestic producers that can capitalize on a more sheltered market. They can raise prices, and they will.
One steel CEO loves the idea, arguing that tariffs will bolster U.S. manufacturing. For instance, the tariffs are expected to drive demand for domestically produced steel, especially in industries like automotive.
I’ve found one company that is supplying steel for over 120 vehicle models from companies like General Motors and Toyota. This CEO has predicted a “golden age of American manufacturing” due to these policies, suggesting that his company anticipates increased orders and improved profitability as foreign steel becomes less viable in the U.S. market.
When Trump first announced these tariffs, this company’s stock jumped 18% in a single day. That said, today, right now, due to the panic over the last month this same company trades at half of book value and has a forward PE of only 13. It is the very definition of a “Diamond in the Rough.”
Don’t wait, I am starting to hear some Wall Street chatter about this company. They are consistently listed on lists of what stocks will benefit from the Trumps tariffs. Click here now. Don’t miss out on this buy.
All the best,
Christian DeHaemer
Outsider Club
