From March Madness to Market Madness: A Deep Dive Into Economic Trends, Ep. 313

In this week's episode of "Capitalist Investor," join Derek and Tony as they dive into the latest market volatility, discussing the catalysts behind recent shake-ups and what they mean for investors. They'll explore the impact of tariffs, the potential of a looming recession, and how Trump's economic policies are affecting business strategies. Whether you're a seasoned investor or just navigating the financial waters, this episode offers insights into current market trends and future forecasts. Plus, don't miss out on Tony's latest stock picks, including DraftKings and Eaton, and their take on March Madness for this year. And if you want to snag some exclusive Capitalist Investor swag, find out how you can participate in their mug giveaway by sending in your questions! Tune in for a blend of sound financial advice wrapped in engaging discussions and timely insights.

1. Market Volatility and Economic Outlook The episode opens up with a discussion on recent market volatility, highlighting the unpredictable nature of the stock market. Derek and Tony talk about past market projections for 2025 and contrast them with the current correction phase in the S&P and NASDAQ. They also touch upon factors like Trump’s tariffs and the impact of potential recessions, emphasizing the need for a balanced approach to investments, beyond just high-performing stocks.
2. Trump’s Tariffs A significant portion of the episode is dedicated to unraveling the potential impacts of Trump's tariffs. Tony suggests that the tariff threat might be a short-lived strategic play by Trump to secure better trade deals. The conversation delves into how these tariffs could affect the markets and mentions the broader implications, like international relations and domestic economic policies.
3. Trump’s Tax Laws and the Fed’s Role The conversation takes a deeper dive into the ramifications of Trump’s tax laws potentially sunsetting at the end of the year. Tony highlights the critical need for action to avoid reverting back to the Obama tax laws. Additionally, there is an in-depth discussion on how the Fed’s interest rate decisions could influence both housing markets and national debt management.
4. Stock Picks: DraftKings and Eaton Tony shares insights into why DraftKings and Eaton are favored picks by their investment team. Despite recent sell-offs, they see potential in DraftKings, citing its position in the gambling sector and the ongoing maturation of the company. Eaton is valued for its role in the AI data center space, promising long-term stable growth. These choices underscore a broader theme of seizing opportunities in both emerging and established sectors.
5. March Madness and Cultural Impact The episode wraps up on a lighter note with a cultural commentary on March Madness. Derek and Tony reminisce about the excitement of filling out brackets and the communal aspect of the tournament. They discuss how sports betting, facilitated by platforms like DraftKings, has transformed the way fans engage with the event. This segment is a testament to how sports intersect with investing, highlighting both the potential and pitfalls of mixing passion with investment.

To eneter the contest to win a Capitalist Investor travel mug submit your question for Derek and Tony to info@SWPConnect.com

Transcript

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Hello and welcome to this week's episode of the Capitalist Investor. As always, you got me, Diamond Hands D and Tony the Tiger. What's going on, man? What's up? How are we doing? Oh, man, it is. I think we're turning a corner here in Cleveland with this weather. I'm excited. It's, you know, as of today, it's going to be 70. It will be like 45 tomorrow. But you know what? We've got a couple days under our belt of some Cleveland spring. Yeah, I love it. I'm here for it. The sun's out. We'll talk a little bit about this a little bit later in the show, but I want to bring it up, but we will be having a contest. We got some Capitalist Investor swag. Yeah, right. Office clean out. Yeah. We found some, some mugs. They're. They're yeti. Like travel mugs. Yeah, maybe, maybe they might be knockoffs, but, but they're nice. I, I travel with mine nearly every day. I got one. So. Yep. But we'll be talking a little bit about that later. So today we were off last week. So we're just going to have a general market conversation about there's been a lot of volatility, what's going on, how do we navigate through this and the rationale maybe behind the curtain for our investment team and what they do and what I'm seeing based on the last several years and the last several, three, you know, last several months of like how everything's rolling out. Maybe we'll have, you know, I'll probably talk about a few stocks that our team recently picked because I was supposed, I was on claiming Countdown on Fox last week and they said, hey, you're looking good. You know, like they, they asked me to have a general market outtake and some or Outlook and then they wanted a couple stock picks and they use none of my stock picks. So guess what? Everyone on. Everyone listening today is going to hear about. Yep. So. And then we'll hit Guess what. It's March Madness. Whether you like basketball or not, you're. It's always going to be a, A topic filling out your brackets. I don't even know if I did a bracket this year. I just, yeah. You know, to be honest with you, it was, it was my favorite time of the year. Oh, it was so much fun. I was into it. You know, I would take Friday at least off of work to watch games all day. Yeah, I was, I was super, super into it. And in the last, I'd say 10 years for sure. But specifically the last five years. Yeah. I barely pay attention. Well, I think it has a lot to do with how fast they turn over the players. It's like, how can you get excited when you just have a new squad every year? You know, they just, they, they can go to the NBA after one year of college. Right? Yeah. So it's ruined college basketball. It sucked the, sucked the wind right out of that whole thing. So it's hard to even keep up. Right. So, but that's the beauty of March Madness. You don't really need to know much. You can fill out a bracket. Right. And still pick your favorite color, pick your favorite team, pick your favorite city and you got a chance. Yep. Right. So, all right, so let's talk about a little bit of the, the, the recent volatility. So I'll kind of kick it off this way. You know, just a, just a few months ago when the analysts were coming out for 20, 25 or 2025, what's going to happen with this market? Nearly every analyst was saying, hey, we're going to be up, you know, mid, mid digit, mid single digits, if not double digits. Right. Like a repeat of the last two years. Fast forward three months and we're in correction mode in the S and P and the Nasdaq. Right. We're in that, we're in the realm. I think the NASDAQ is definitely in. Yes. So the biggest catalyst of this whole thing is, is Trump's tariffs. Right. We still feel that the, the tariff threat is, is short lived. He's trying to accomplish something with every company or not, I want to call them companies, but every country he's dealing with. Right. To get a better deal for us for long term growth. The short term pain will exist because there's just a lot of air to come out of this market. That's the S P has been up over 20% the last two years. Unfortunately, it has been driven by seven stocks both years. Or maybe 10. You can maybe group in 10. That's not normal. Right. And you know, as I'm having client reviews right now, it's not a fiduciary thing to say, hey guys, I'm going to put you in seven stocks. And here we go. Right. Let's hope six out of seven work. You know, it needs to be. That's what our investment team is here to do, is to have a balanced portfolio of things that are in favor, out of favor. Because guess what? Things rotate. You know what? One of the better performing asset classes this year is international. Yeah. It has been a dog the last two years because everyone's focused on domestic, like international is up, I think 10 or something like that this year. So again, if you, I believe in mean reversion and in a lot of different things, whether it's life, the market, everything. Right. So that is what we're starting to see. I'm in the camp that, you know, we haven't had an inner, we haven't had an inner year correction in nearly two years and that's a 10 to 20% pullback. It's not that's, you know, they normally happen every, you know, 12 to 18 months is that we will see some type of pullback and we've gotten close the last two years, but we never entered the period. Right. And every news feed is just talking about recessions right now, but it is being driven by the tariff talk. So I feel that the first half of this year is a, definitely a shakeout period where and then the next year or the next, the second half of this year is going to be more a, more of a positive market in that we finished up for the rest of the year. However, and I'll lead it up, I'll kick it over to you. D. But like I, I can't rule out a recession and I don't know if that like we had a recession under Biden and it was, it was shallow, it was down barely a percent both quarters, but it was technically a recession but didn't feel like it. Right. And I, and I feel like that that's what's going to happen if, you know, they're expecting a negative GDP this coming, this next coming quarter. At least the Atlanta Fed is coming out and saying that we're going to be down like two and a half percent or something. So we'll see. What do you got? D. Yeah, you know, I think whenever the market gets, you know, I don't want to say overvalued but maybe like over inflated. You know, you always, people are looking for excuses to sell off basically. And you know, I think the table tariff talk has, you know, lined up perfectly with that. So, you know, it's, it's kind of just, you know, a, an unknown fear out there that is kind of causing the sell off but we don't really specifically know like what, what these outcomes are going to be. Yeah, the market doesn't like uncertainty. Exactly. That's the big problem. Like one thing we should be concerned about or, or I'd say, well we definitely need to be concerned. But a thing I feel like it will be coming up in the near term is the recalibration of Trump's tax laws. Right. They're going to sunset at the end of this year unless something is done. And if nothing happens, I've talked about this several, several times. But if we'll revert to the Obama tax laws and everyone's going to be paying more taxes, specifically business owners, all of us, the marginal tax brackets are going to expand again and I feel like a deal is going to get done. We have a majority in all the, all the seats, you know, the, the, you know, the House, the Senate presidency, things like that. So I feel like we're, we're gonna have that, but it's, it's not, it takes only a few votes to turn it the other way though too, because every, everything's pretty tight, but when it comes to the market, because we don't know what it's going to do. And I feel that these tariffs are a negotiating game. The old saying is, you know, time in the market is greater than timing the market. And these, I feel that these tariffs are, are a very short lived, posturing play. And when they, when, when Trump comes out and says, hey guys, I was just kidding, you know, you're going to want to be in the market those though, that particular day and probably the week thereafter. Exactly right. And, and that is when. That again, that's why being in the market is better than timing the market because we don't know when. This dude, he, I know he likes finding microphones everywhere he goes, but you never know what he's going to say. Right. So the market has been pretty, not, I want to say, not as volatile because he hasn't talked about tariffs in a week. Right. So, but going back to the recession though, I, I feel like that, you know, talking to business owners, Mark, you know, if he were here, he would have some more color on it because he was like an EO and YPO and things like that. But he's, he said it on tv. He said it to, you know, us and the investment team that a lot of like small business owners are just, they're in a holding pattern until they get clarity on these tariffs. They don't want to spend money or don't know how to allocate their money if they don't know where we're going. So Trump knows this, right? He, he knows what he's doing. It just looks, it looks like he's just, you know, firing from the hip. I'd like to believe that he knows what he's doing, I shouldn't say, I shouldn't put it such a rubber stamp on it, but I feel like, I feel like he knows what he's doing. But these, these tariffs are interesting because it might not just be about money. When he was on the campaign trail, he talked about cracking down on fentanyl. This is a humane thing, not a monetary thing. He goes, our fentanyl is coming into this country and it's, and it's wrecking us. We have an increasing drug problem. Drug problem. Mexico and Canada. Bolt, bolster up your side of the stuff. Stop. If I can see a, if I can see lower amounts of fentanyl being seized at the border, you guys will get an attaboy and I'll, you know, help with the tariffs. That's like, that's part of this negotiation. No one talks about it, but that is, that was one of his agendas and he did bring it up, but no one, the media is not going to really talk about it. It's not fun and sexy, but that, but immediately what the Mexico and Canada did was add 10,000 Border Patrol agents across our borders to help solve this. Yep. And it's a huge problem. Right. So it's a border. So there's, you know, countries on both sides, so, but both sides can, can be helping. You know, to be honest with you though, he seems to have, have gone. It doesn't seem like the Canadian negotiations are going well. I don't know if you saw, saw that. Yeah, he did say something yesterday on Canada and basically said they were impossible to negotiate with and that they were doing it in bad faith. That, that's essentially, essentially what he said there. So you know, I think I also believe his overall approval ratings went to another all time high this week. Is nothing crazy, but definitely, definitely his, his highest approval rating. So I think a lot of people, and you know, in talking with people too are really in agreement with, with some of his, his stances and you know, I think the, you know, we, we can't run trillion dollar deficits forever. And this is kind of bringing back a point to what you were talking about earlier, like how much, how much air was pumped into the economy in the fourth quarter specifically for, for the, you know, election. Yeah, I mean that's having a big impact on, on the market now. So the Fed, you know, by the time we post this, maybe the Fed comes out with their, their, maybe they come out with like their decision whether to lower rates or not. But I feel that the Fed is, is going to talk about that. And it's going to move the market today or broadcasting before his decision. But this is something that, I've seen these crazy Twitter feeds where Trump is trying to wreck the market so that he can get lower rates because A, it will stimulate the housing market, which is dead. You know, no one's buying or selling houses because no one wants a 7% mortgage rate on a 30 year mortgage. And he has vocally came out and talked about that. And then B, we are rolling over $7 trillion of debt this year and it can't roll over. It's rolling over from essentially zero to over 4%. He needs the Fed rate to be closer to 3 so that it's less of a blow and less of interest payments that we. So again, no one really thinks ahead like that. Maybe Trump is, maybe he's trying to force the hand of the Fed to start lowering rates to give the simulation or the, not the simulation, but like the visibility of like, hey, there's a recession, man. Like, hey, Jerome, why don't you lower the rates? Right? It's a lot of these things are posturing of maybe something that has been well thought out. Imagine that. Yeah, and this is just, you know, the AI answer when I type it into Google. But interest payments on the national debt are projected to reach$892 billion in 2024. I think there's projections that it's going to be over a trillion dollars this 25. Yeah, like 1.2 trillion is kind of sticking in my mind. Like that is not sustainable. So you can be mad at Trump if you're not a supporter of his about, you know, tariffs and, and cost cutting. You know, I don't, I don't really understand why people are mad at, you know, getting out. Corruption. Dude, they're burning down Tesla. If you have a Tesla right now. Like, it's legit dangerous. You, you're, you're in harm's way. Your car's either gonna get vandalized or they're gonna stop and beat you or they're going to light it on fire. Yeah, like, it is so extreme, man. Like, why? Yeah, like what did they do? What did they do to you? Like, oh, you cut off funding to. How is it helping anyone? Yesterday there was a huge, it was like a Tesla service center. It was a giant fire. There was nine, ten cars on fire outside. Yeah, it's, it's a felony to do that too. Right. Hopefully these people start going to jail for a long time because it's, it's out of hand. For sure. It's crazy man, the way, I mean you see how the last four or five years have rolled out and I feel like if the left is pissed off about something, something's getting destroyed. Whether it's a city or a building for real or it is construct, it is destructive. Where the right gets pissed off, they just don't buy it or go there. They didn't, they didn't go down to Bud Light and, and blow up the plant so they can stop making Bud Light. They just stop buying it. Exactly. Right. We just, that's an example. Right. I think, okay. I think Kid Rock went in his backyard and shot up a case of Bud Light with his gun. Okay. All right. Dude, he bought the Bud Light. But he bought, he bought it first and destroyed it. He destroyed that $25 Bud Light case. So yeah. Mark Tepper here from SWP Investment Management. It's time to elevate your portfolio with the SWP Growth and Income etf. A diversified basket of high quality growth that pay dividends. SWP stands out from the pack because total returns matter. Don't just Invest. Thrive with SWP. Visit investswp.com for more information. Disclosures apply. Again, I prepared all these stock tips, these things we were going to talk about on Liz and they just never got to it. So I, you guys get to hear about it but this is a stock pickers market. So I'm going to run through two ideas that you know, these are two stocks that our, our team, our investment team recently bought within, I'll just say in the last week or 2, but DraftKings is one of them and the kind of the story behind them is DraftKings. You know you can do online betting, right? You get the app and you can live bet anything, table tennis, horses, whatever, football, baseball. But they ran their price, ran up into earnings which was in the beginning of the year and then got a bump after earnings and then proceeded to sell off 30% over the last four weeks on no company news. They kind of got wrapped up into this AI deep seek, whatever as a technology company. Well, I mean they are a technology company but at the end of the day they're a casino. Right. You didn't see the casino stocks get the wind taken out 30% but DraftKings. So the reason we bought it was because it, it has a 30 discount in our eyes now because of it's becoming a more mature company. They've alluded to paying dividends and stock buybacks. They're more profitable because when you sign up for the app you get to get a promotion saying hey, put a hundred bucks in and will give you a free 100 bucks. Well those are all rolling off like all those offers and now they got sticky customers. And unfortunately, I hate to say it this way, it's a vice stock. You know, you kind of prey on people's, you know, addictions to have action. Right. But you know, that's how Vegas has survived for years and years and years. Right. But those promotions are rolling off on new users and it just gains popularity. They're like on you watch the super bowl, you like, they're just, they're huge. Yep. They're just everywhere. Everywhere. And teams that like their support, you know, they're backing teams and you know, they're just everywhere. You're being bombarded whether you notice it or not. So we expect it to get, you know, it peaked out at about $53. We expect it to get back there. Now does it take three weeks, three months or a year? I don't know that, you know, if I knew that we'd all be very rich. But, but we feel like it all based on the numbers that the company has come out and broadcast. That's where we feel that the target would be. This is a stock that I don't own personally, but I SWP does. And then Eaton, so Eaton's a nice local Cleveland company. They produce large like power management grids for, for just think industrial, what's in the basement, turning on the building. Right. Big, huge, large electrical grids. Right. And 25% of their business is now wrapped up in the AI data centers. They are the engine inside of these data centers and that's 25% of Eaton's business. And again they got wrapped up into this AI sell off. They're down 25% from four weeks ago, yet they had their investor day last week and they said they're expecting 6 to 9% organic growth for the next five years. Right. Annualized. And if you think about our economy like a 3% GDP growth is a good economy. Right. You know, anything around 3% is very robust and we're looking at something that's going to grow to two to three times the, the economy. It's more of a slow play but it's a, it's a value play right there. They have this, they, they have, it's a great exposure to industrials which again aren't that sexy against you know, high flying tech stocks. Right. But they have their niche in AI. So those are just give you some, some ideas. This is a stock I, I own through our ETF and, and the sm and you know, we own it for our clients, so. Thoughts, Derek? Yeah, you know, I think, you know, eat. I I Eden is a great company and, you know, obviously we get exposure to that here in, in Northeast Ohio, but everything you just said, I, I think makes it a really good long term play. So. Definitely like that one. Yep. You know, the, the Draft Kings, you know, maybe we can segue into the March Madness Madness with, with the DraftKings. Because, yeah, you know, it's, it seems everyone has, you know, a DraftKings account these days and they're talking parlays, you know, if I'm at like a, you know, a family party, you know, talking to people I don't normally talk to, and they're like, yeah, you know, and, and it's a double edged sword because obviously there's people who get addicted to gambling very easily and it's advice for them. But then there's a good chunk of their customer base who are, you know, making, you know,$5 parlays to try to turn $5 into, you know, $50. Or something, or 500, like something ridiculous. Right. But you know, I would say the majority of people have a limit. Right. They put $25 in and they let it ride for a, a week or two or whatever, whatever their budget is. Right. Throw a little bit of money in for, you know, the Masters tournament. Right. And pick, pick a couple of golf. Oh, that's coming up too. Yeah, can't wait. But. All right, so what do we got? So we got our favorites. What are the fa. Who are the favorites, Derek? So we got, what? Florida. We got Florida. I had a different odds and it just, just went away. But we got Florida is the top at like plus 350. Okay. We got Duke right behind them at plus 360. We got Auburn at plus 400 and Houston at plus 600. Okay. So I stopped doing brackets, but I, you know, but the way to get my fix throughout the entire thing. I know one of my buddies created like a, like super bowl squares, super bowl boxes, whatever people want to call them, but the super bowl squares, so they do a square game and you have, you have, you get to play every game. So they have the winner and the loser. So it'd be like Eagles versus, you know, Eagles versus Kansas City. Well, this is the winner of every game versus the loser of every game. So you are. The first round is worth 25. If you win, you get 25 bucks, and so does 32 other people. Right. And then the next round is $50, and the next round's 150. Like it. It. They think of creative ways to disperse the money, but you're involved in every game and you get a particular set of numbers just like you would in the Super Bowl. So that's what I'm doing. And I also put a little money on Houston. Nice. I think they play. I think they play good defense. I don't watch a lot of basketball, so by no means is this financial advice, whether it's, you know, legit or degenerate, but it's. I just watched them. I actually just caught a couple moments of every game that they. Not every game, but, like, games that they've played, and they're just like one, I believe one of the better defensive teams, and I think that that can go a long way in a tournament. Yep. Yeah, I have. I've watched basically no college basketball at all. And like I said, you know, we're super into it before, but, you know, I feel like it might be getting a little bit more buzz than the normal this year. So. Yeah, I'll make a pick here, really, Just because I saw it yesterday. But St. John's with. Oh, man, I'm blanking on the coach's name now. Patino. Pitino. Yeah. So I saw him on the media tour yesterday, and he's had some. Some really great clips about leadership and stuff like that throughout the year that I've seen. So, you know, I'll throw a flyer on. What are they, like, 20 to 1 or something? Yeah, 22 to 1. Okay. You know, I was gonna. I was gonna take Houston, too, but, you know, I'll. I'll take Alabama. You know, Alabama. It's. It's funny because in basketball, essentially, anyone can win on any given night. So we got. We got games in Cleveland, though, right? The regionals here? I believe so, yeah. So, okay, you went to Robert Morris? Yeah. Oh, I didn't know that. There you go. All right. Our engineer, Chris. Yeah. Bobby Moe. Nice. Yeah. Where'd you go? Robert Morris. Bobby Moe. It's in Pittsburgh. All right. Our friend Joe Yee went there. Oh, Shout out, Joe. He's. I think he's. I don't think he's kidding. I think he wants to stay at my house so he can go to that game. I was like, I don't know. In the middle of the week. My wife is gonna like that. But he doesn't listen to this, so he'll never know. So, yeah, I'll. Because they're playing Robert Morris. I noticed them in the bracket. You know, two seed isn't bad. So. So I'll take. I'll take Bama and St John's but I will be rooting for. For Bobby Moe in the opening round. Nice. Yep. All right, so, yeah, let's close it down here with the little giveaway. Yeah, so I, you know, we have a few of these mugs that we found during some spring cleaning here in the office. And there are the capitalist investor mugs. They're pretty nice. They're like a yeti. So what we plan on doing is over the next couple weeks, because we only have, like, three or four of these. If you send us a question and, you know, we use it on air, we will, you know, give a shout out to that person that sent us the question, and then, you know, we'll send you the mug. Now, I can't tell you that we're gonna. We got four mugs, and we're gonna do this over four weeks. Right? So we're gonna space this out. And if you. If. Don't be offended if you. If you don't win, you know, keep on trying. Keep on, you know, we'll. We'll probably give you a heads up saying, hey, we really like that topic, and we're gonna roll this out in the next few weeks and we'll let you keep you posted or whatever it may be, but it's a way to get some swag out there again and also get us a topic that, you know, our viewers and listeners would like to. To hear about. Yep, absolutely. So. And the best way to submit those questions or those. Those pod podcast topics would be what info? Yep. Info WP connect dot com. Yep. So they get. Submit the question through that. And again, that's infowpconnect.com and take us home. D. All right. Yeah. Well, thanks for listening. Like Tony said, you know, if you want to win that mug or you got any questions, comments, ideas for the show, infowpconnect.com is the best way to reach us. Thanks for listening and have a great week. The opinions expressed in the podcast are for general informational purposes only and are not intended to provide specific advice or recommendations for any investment, legal, financial, or tax strategy. It is only intended to provide education about the financial industry. Please consult a qualified professional about your individual needs SA.