“Some countries are weaponizing trade and forcing companies to take sides and make choices that go against economic principles,” said Xi Jinping, standing in the Great Hall of the People, a group of 40 of leading global CEOs in attendance. The US had announced additional secondary tariffs of 25% on any country that buys Venezuelan oil. US tariffs on China were lifted to 20% this month. And Xi bought 68% of Maduro’s energy exports in 2023. “We must jointly maintain the multilateral trading system, jointly maintain the stability of the global industrial chain,” said China’s President, quietly praying for a crash in the S&P 500, a surge in US inflation, a collapse in Trump’s approval rating, anything to end the madness.

Overall: Just three more days to go until Liberation Day, although from exactly what we’re unsure. The Atlanta Fed slashed its GDPNow forecast for the first quarter to a -2.8% economic contraction on an annualized basis. There are all sorts of reasons why that’s likely far too pessimistic, but Wall Street economists continued to lower their GDP forecasts too. The University of Michigan’s consumer sentiment index slid 10%, declining across all groups by age, income and wealth. Democrats and Independents remained far more pessimistic than Republicans, as the country’s political chasm widened further. Forty percent of respondents blamed high prices for eroding their living standards. Just 16% believe their income gains will outpace inflation, which they expect to rise +4.1% over the longer term. That’s the highest inflation expectation since 1993 in the University of Michigan survey. The Conference Board released its consumer confidence survey which showed the most pessimistic reading in 12yrs, at a level that usually signals a coming recession. Respondents expect inflation to exceed 6% because of Trump’s tariffs. Faltering growth and rising inflation in 2025 is the exact opposite of what voters expected last November. Car buyers rushed to purchase new vehicles ahead of Liberation Day. Half of America’s auto sales are imported and the tariffs on them are set to jump 25%. Trump initially warned automakers to not raise prices in response to the hike, and later said he couldn’t care less if car prices rise. Dealers have 60-90 days of inventory. Like all business leaders here at home, and across the globe, they’re trying to figure out how to keep their heads low while limping along. The US stock market declined back toward recent lows, well below the November 5th election-day levels, unsure like everything and everyone else, concerned about the appearance of a growing dogmatism out of DC, wondering where the ‘Trump Put’ is struck.

Week-in-Review: Mon: China to include services in a multibillion-dollar subsidy program to stimulate consumption. Top US officials share classified details of military strikes with journalist by mistake. UK looks to soften impact of its digital tax on US tech groups. Ukraine urges EU to renew duty-free trade deal. Eurozone PMI mfg 48.7 (48.2e) / serv 50.4 (51.1e) / comp 50.4 (50.7e), UK PMI mfg 44.6 (47.2e) / serv 44.6 (47.2e) / comp 52.0 (50.5e), US PMI mfg 49.8 (51.7e) / serv 54.3 (51.0e) / comp 53.5 (50.9e), S&P +1.8%. Tue: US agrees maritime ceasefire deal with Ukraine and Russia. Moody’s warns on deteriorating outlook for US public finances. Trump considers two-step tariff regime on April 2. US farmers express dismay over proposal for levies on China-built ships. Turkish Central Bank and Finance Minister hold conference call with international investors. Trump backed World Liberty Financial to launch stablecoin. Australia’s Labor government unveils unexpected tax cuts in pre-election budget. Germany IFO survey current conditions 85.7 (85.5e), US Home sales 676k (680k e), US Cons conf 92.9 (94.0e), S&P +0.2%. Wed: The Atlantic magazine publishes more excerpts of the Trump administration’s group chat on Signal that detail timings of military strikes in Yemen. Taiwan boosts defense readiness in show to US and China. Chinese financial authorities tell companies and advisers they can restart A-shares IPO filings. Gazans protest in rare display of dissent against Hamas. Brazil’s Bolsonaro to stand trial over alleged coup plot. Fidelity Investments to launch stablecoin. Australia CPI 2.4% (2.5% e), UK CPI 2.8% (3.0%e) / core 3.5% (3.6%e) / RPI 3.4% (3.5%e), US Durable goods 0.9% (-1.0%e), Russia IP 0.2% (1.2%e), S&P -1.2%. Thur: Canada’s Carney says old Canada-US relationship is ‘over’ and vows to renegotiate trade agreements. EU looks to hit US services in tariff retaliation. Macron says Europe’s reassurance force in Ukraine to take shape in 3-4 weeks. Trump to impose 25% tariff on car imports; US trading partners warn of retaliation. Putin says he is open to co-operation in region as US vice-president heads to Greenland. Australia PM calls for elections. Lululemon warns on US consumer spending. US GDP ann QoQ 2.4% (2.3%e), US Jobless claims 224k (225k e) / cont. claims 1856k (1886k e), Japan CPI 2.9% (2.7%e), S&P -0.3%. Fri: China’s Xi welcomes top global CEOs and asks them to use their influence to defend trade. Trump and Carney speak over US-Canada trade war tensions. US pushes for expansive new deal to control Ukraine’s minerals and energy. Zelenskyy says Europeans agree to deepen intelligence ties with Kyiv and rejects latest US attempt to take control of Ukrainian assets. Donald Trump restates that the US must gain control of Greenland. BoJ summary of opinions shows broad support for further rate rises. Israel strikes Beirut for first time since November ceasefire. Mexico slides towards recession. UK retail sales 2.2% (0.5% e) / GDP 1.5% (1.4%e), France CPI 0.8% (1% e), Germany GfK consumer conf idx -24.5 (-22.5e) / Unemp Rate 6.3% (6.2% e), EU consumer conf. idx -14.5 as exp, US PCE 2.5% as exp / Core PCE 2.8% (2.7% e), UMich cons. sent. Survey 57 (57.9e), S&P -1.0%.

Weekly Close: S&P 500 -1.5% and VIX +2.37 at +21.65. Nikkei -1.5%, Shanghai -0.4%, Euro Stoxx -1.4%, Bovespa -0.3%, MSCI World -1.5%, and MSCI Emerging -0.9%. USD rose +3.7% vs Ethereum, +3.3% vs Chile, +1.1% vs South Africa, +0.7% vs Turkey, +0.7% vs Mexico, +0.6% vs Brazil, +0.5% vs Russia, +0.4% vs Indonesia, +0.3% vs Yen, and +0.1% vs China. USD fell -1.3% vs Sweden, -0.6% vs India, -0.5% vs Bitcoin, -0.3% vs Canada, -0.2% vs Australia, -0.2% vs Sterling, and -0.1% vs Euro. Gold +2.2%, Silver +4.0%, Oil +1.6%, Copper +0.3%, Iron Ore +2.1%, Corn -2.4%. 10yr Inflation Breakevens (EU -2bps at 1.92%, US +4bps at 2.37%, JP +3bps at 1.62%, and UK +2bps at 3.39%). 2yr Notes -4bps at 3.91% and 10yr Notes flat at 4.25%.

2025 Year-to-Date Equity Index Returns: Poland +30.9% priced in US dollars (+22.9% priced in zloty), Czech Republic +26.5% priced in US dollars (+20.4% priced in koruna), Greece +23.5% in US dollars (+18.1% in euros), Hungary +22.6% (+15.2%), Colombia +21.8% (+16.2%), Spain +20% (+14.8%), Chile +19.7% (+14.7%), Austria +18.7% (+14%), Italy +18% (+13.3%), Brazil +17.6% (+9.7%), Germany +17.4% (+12.8%), Norway +17.3% (+8.1%), HK +16.6% (+16.8%), Euro Stoxx 50 +13.8% (+8.9%), Switzerland +13.6% (+10.7%), Sweden +13% (+2.4%), France +12.1% (+7.3%), South Africa +11.8% (+9%), Finland +11.6% (+7.2%), Ireland +11.4% (+6.5%), Mexico +9.9% (+7.4%), UK +9.5% (+5.9%), Portugal +8.8% (+4.1%), Belgium +8% (+3.3%), Netherlands +8% (+3.3%), Singapore +6.8% (+4.9%), Korea +6.8% (+6.6%), Vietnam +3.6% (+4%), Israel +1.7% (+2.6%), Canada +0.7% (+0.1%), China +0.5% (0%), Saudi Arabia +0.1% (-0.1%), India -0.5% (-0.5%), Australia -0.5% (-2.2%), UAE -0.5% (-0.5%), MSCI World -2% in dollars, Japan -2.5% (-7%), New Zealand -4.2% (-6.3%), Philippines -5% (-5.8%), S&P 500 -5.1%, Malaysia -7.1% (-7.8%), Taiwan -7.2% (-6.2%), Turkey -8.5% (-1.7%), Russell -9.3%, Argentina -9.6% (-6.1%), Indonesia -10.3% (-8%), NASDAQ -10.3%, Denmark -11.3% (-14.8%), Thailand -15.3% (-16.1%).

Sparks: “Every year there’s a security that captures the zeitgeist,” said Sparks, an investor, business builder, iconoclast. “Nvidia is today’s of course.” The company reported Q4 earnings on Feb 26th, revenue grew 78% year-over-year. By every metric the reported numbers were remarkable, the outlook was strong. The stock was trading at $131/share and went straight down. On Friday it closed at $109.67, down 21% year-to-date. “That post-earnings decline is totally correct. That’s how markets work. The stock was and still is absurdly overvalued.”

Sparks II: “Near the highs, Nvidia had a $3.5trln market cap,” continued Sparks. “When people buy a company like this, they generally expect something like a 12-15% annual return which is a rough double in 5yrs.” he added. “You run the math to see what you have to earn to justify a $7trln market cap, given that at that point you should assume the market is mature, and it’s at least $400-$500bln in profits a year.” To put that into perspective, global chipmakers collectively earned roughly $130bln in 2024 and the S&P 500 companies earned roughly $4trln last year.

Sparks III: “So when you step back and look at Nivida over a 5-year investment horizon, even after the recent decline, it doesn’t make all that much sense,” said Sparks. “It’s a highly capital-intensive business that’s subject to obsolescence. And it’s vulnerable to DeepSeek risks.” With such vast profits on display, the world’s smartest and most creative competitors are on their way. “The only firms that command such extreme economics are the network effect ones, Facebook, Google. And even they’re at risk from AI. So why do investors own risk assets right now?”

Sparks IV: “In 1968 you had the Nifty-Fifty stocks,” said Sparks. “They called them the inevitables.” Coke, Disney, Xerox, Kodak. “In 2000 you had the dotcom bubble.” If you bought anywhere near the peak of those bull markets, you waited more than a decade to get back to even, and far longer in inflation-adjusted terms. “The starting point is always high valuations. Price to sales, price to book, market cap percentage of GDP, CAPE,” he said. “And as an investor, you need to know we’re at top 2 percentile of almost all traditional valuation metrics.”

Sparks V: “In my life, I’ve seen only 2-3 instances when it was obvious that buying stocks was a terrible investment,” said Sparks. “There’s no rational reason for an investor to be bullish now. Not one. And you don’t even need to get into Trump’s economic policies, trade wars, etc,” he said. “When assets are cheap, they’re resilient. When asset prices are rich, they’re fragile.” Indeed. “I couldn’t care less about Trump’s policies at a P/E ratio of 8. But with the S&P at a trailing P/E of 27 I care. Everything needs to go right, nothing can really go wrong, it’s fragile.”

Sparks VI: “After a bubble there’s always a massive rationalization for why being overvalued was obvious,” said Sparks. “So, this time around, what will that narrative be after the fact? Will we tell ourselves that profit margins were quite clearly unsustainable. Or it was so obvious that the geopolitical and macro choices Trump made meant it couldn’t have gotten any better, it was only going to get worse?” he said. “We believed that the euphoria surrounding AI lifted us to a new and permanent plateau? It’ll be something like that. 1968 and 2000 had a story, they all do.”

Anecdote: “Where’s the marginal demand going to come from to increase corporate profits?” asked Sparks. “The government is spending at full bore, the consumer has been spending at full bore,” he said. “What we do have is the AI capex cycle - that’s the Nivida story - but we’re not going to get more aggressive investment in this sector. You can’t build data centers and power capacity at a faster pace - I’m in that business and I’m telling you we’re flat out, we’re at the zenith.” A source of increased marginal demand across the economy is just not there. “People are worried about excessive government deficits for various reasons, most of them valid.” Niall Ferguson posits that when interest payments exceed defense spending, a great power loses its standing. “But as an equity investor, the scale of deficits we’ve been running is dangerous for a less obvious reason. There is an absolutely obvious correlation between government deficits and corporate profits. It is a devasting fact,” he said. “People don’t really appreciate that when the US runs a 6% fiscal deficit, it means roughly $2trln of excess spending flows through the economy,” he said. “Today’s massive corporate profits are hugely a function of the absurdity of this $2trln in excess spending. So, no one should be surprised to discover that if we cut deficit spending materially then we’re going to have a very significant earnings recession.” Enter DOGE and a pledge to cut the deficit in half, perhaps more. “Where’s the upside in this economy? It is nowhere, literally. So, you have all of today’s macro-economic policy problems, no prospect for upside there other than the possibility that things won’t be as bad as they appear, and on top of that you have these absurd equity valuations based on every historical metric,” said Sparks. “Investors are set up for the kind of returns experienced after 1968 and 2000 – convexity on the downside and dead money for a decade or more.”

Good luck out there,

Eric Peters

Chief Investment Officer

One River Asset Management

Disclaimer: All characters and events contained herein are entirely fictional. Even those things that appear based on real people and actual events are products of the author’s imagination. Any similarity is merely coincidental. The numbers are unreliable. The statistics too. Consequently, this message does not contain any investment recommendation, advice, or solicitation of any sort for any product, fund or service. The views expressed are strictly those of the author, even if often times they are not actually views held by the author, or directly contradict those views genuinely held by the author. And the views may certainly differ from those of any firm or person that the author may advise, converse with, or otherwise be associated with. Lastly, any inappropriate language, innuendo or dark humor contained herein is not specifically intended to offend the reader. And besides, nothing could possibly be more offensive than the real-life actions of the inept policy makers, corrupt elected leaders and short, paranoid dictators who infest our little planet. Yet we suffer their indignities every day. Oh yeah, past performance is not indicative of future returns.