Background of the Dissipation of Concerns about the Bottom of the Stock Market | Strategy Report | Moneyクリ MoneyX Securities Investment Information and Media Useful for Money
Stock prices are at fair value, and the market has seen through the contradictions and limitations of Trump's policies.
Japanese stocks are under pressure at the upper levels, but the lower levels are also firm. This week started with a significant decline, with the Nikkei average temporarily dropping by 600 yen due to the Trump administration's substantial increase in steel and aluminum tariffs. However, by the end of trading today on Friday, the closing price is at a level not much different from the end of last week.
Globally, in the U.S., the Nasdaq Composite Index returned positive year-to-date and reached its highest level since February. European stocks, led by German stocks, which are at their highest level, are also doing well. Stock indices, which show the movement of the world as a whole, have returned to the point where they are aiming for the highest level again. The background to this is as I have repeatedly stated in this strategy report. Namely, 1) the market price is at a level that is in line with the theoretical value derived from the current earnings forecast and the level of interest rates - in other words, the current stock price is at fair value, and 2) the market has seen the contradictions and limitations of Trump's policy.
As in the past, in the short term, there will be situations where the market will fluctuate due to the Trump administration's trade policy, but if there is a downward pressure due to it, there will be immediate buying. This is because, as mentioned above, the market has seen through the inconsistencies and limitations of Trump's policies. The hardline stance has since been withdrawn, and the market has given up on the idea that there is no choice but to settle down in the end. This is called TACO trade in the European and American markets these days. It's an acronym for "Trump Always Chickens Out," which means that President Trump always backs off at the end and reverses his hardline stance.
When did the market become aware of TACO? This was when the U.S. triple depreciation occurred. The tariffs went into effect one week after the announcement of the reciprocal tariffs, but on April 9, at noon Japan time, a triple depreciation occurred in which the dollar, U.S. Treasuries, and U.S. stocks (futures) were sold at the same time. The Trump administration announced a 90-day moratorium on tariffs shortly thereafter. After that, in response to Trump's intention to dismiss Chairman Powell, Mr. Trump said that he would withdraw Mr. Powell's dismissal as market turmoil continued due to distrust of the dollar. Now the market knows that the Trump administration cannot overlook the sell-off of U.S. Treasuries and dollars. Even Mr. Trump has made it clear in broad daylight that he must protect the U.S. economy at the end of the day.
The market bets that the TACO trade will succeed
And more news has come in to deepen confidence in TACO. It has been reported that U.S. President Trump spoke on the phone with Chinese President Xi Jinping on trade issues on the 5th.
Prior to this, the U.S. side claimed that China was delaying the export of rare earths, which was supposed to have been agreed upon after trade talks in Switzerland, and President Trump criticized last month that "China has broken the agreement." At first glance, it seems that the U.S. is taking a strong stance in condemning China, but in reality, it is akin to saying "we are in trouble without rare earths." After all, China holds 70% of the world's rare earths.
(Source: Bloomberg)
Needless to say, rare earths are essential minerals for cutting-edge electronic devices, and without them, semiconductors and automobiles cannot be produced. In the United States, Ford has already been forced to halt production. It's not just automobiles. Rare earths are crucial for fighter jets, nuclear reactor control rods, and other technologies that are vital for national security. If they hold this, even Trump would have no choice but to concede to China.
Ultimately, the TACO trade that the market is betting on is successful. This is the backdrop against which the market's downside anxiety is being dispelled.
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Background of the Dissipation of Concerns about the Bottom of the Stock Market | Strategy Report | Moneyクリ MoneyX Securities Investment Information and Media Useful for Money
Stock prices are at fair value, and the market has seen through the contradictions and limitations of Trump's policies.
Japanese stocks are under pressure at the upper levels, but the lower levels are also firm. This week started with a significant decline, with the Nikkei average temporarily dropping by 600 yen due to the Trump administration's substantial increase in steel and aluminum tariffs. However, by the end of trading today on Friday, the closing price is at a level not much different from the end of last week.
Globally, in the U.S., the Nasdaq Composite Index returned positive year-to-date and reached its highest level since February. European stocks, led by German stocks, which are at their highest level, are also doing well. Stock indices, which show the movement of the world as a whole, have returned to the point where they are aiming for the highest level again. The background to this is as I have repeatedly stated in this strategy report. Namely, 1) the market price is at a level that is in line with the theoretical value derived from the current earnings forecast and the level of interest rates - in other words, the current stock price is at fair value, and 2) the market has seen the contradictions and limitations of Trump's policy.
As in the past, in the short term, there will be situations where the market will fluctuate due to the Trump administration's trade policy, but if there is a downward pressure due to it, there will be immediate buying. This is because, as mentioned above, the market has seen through the inconsistencies and limitations of Trump's policies. The hardline stance has since been withdrawn, and the market has given up on the idea that there is no choice but to settle down in the end. This is called TACO trade in the European and American markets these days. It's an acronym for "Trump Always Chickens Out," which means that President Trump always backs off at the end and reverses his hardline stance.
When did the market become aware of TACO? This was when the U.S. triple depreciation occurred. The tariffs went into effect one week after the announcement of the reciprocal tariffs, but on April 9, at noon Japan time, a triple depreciation occurred in which the dollar, U.S. Treasuries, and U.S. stocks (futures) were sold at the same time. The Trump administration announced a 90-day moratorium on tariffs shortly thereafter. After that, in response to Trump's intention to dismiss Chairman Powell, Mr. Trump said that he would withdraw Mr. Powell's dismissal as market turmoil continued due to distrust of the dollar. Now the market knows that the Trump administration cannot overlook the sell-off of U.S. Treasuries and dollars. Even Mr. Trump has made it clear in broad daylight that he must protect the U.S. economy at the end of the day.
The market bets that the TACO trade will succeed
And more news has come in to deepen confidence in TACO. It has been reported that U.S. President Trump spoke on the phone with Chinese President Xi Jinping on trade issues on the 5th.
Prior to this, the U.S. side claimed that China was delaying the export of rare earths, which was supposed to have been agreed upon after trade talks in Switzerland, and President Trump criticized last month that "China has broken the agreement." At first glance, it seems that the U.S. is taking a strong stance in condemning China, but in reality, it is akin to saying "we are in trouble without rare earths." After all, China holds 70% of the world's rare earths.
Needless to say, rare earths are essential minerals for cutting-edge electronic devices, and without them, semiconductors and automobiles cannot be produced. In the United States, Ford has already been forced to halt production. It's not just automobiles. Rare earths are crucial for fighter jets, nuclear reactor control rods, and other technologies that are vital for national security. If they hold this, even Trump would have no choice but to concede to China.
Ultimately, the TACO trade that the market is betting on is successful. This is the backdrop against which the market's downside anxiety is being dispelled.