Capitalist Investor

Goldman Sachs, S&P 500, and Tariffs, Ep. 314

• Strategic Wealth Partners

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In the latest episode of the Capitalist Investor, hosts Derek and Tony dive into a range of timely and intriguing topics that are making headlines in the economic and financial world. Here are the top five hot topics they discussed:

  1. Goldman Sachs' Recession Predictions: Goldman Sachs has ramped up the 2025 odds of a recession, boosting it from 20% to 35%. This shift has inevitably caught the attention of investors and consumers alike. With the markets always seeking predictability, any hint of economic downturn can cause ripples of concern. Derek likens these predictions to NFL draft grades, highlighting the uncertainty and speculation surrounding them.
  2. Tariffs and Their Impact on Car Prices: The ongoing debate over tariffs, especially under President Trump's administration, has a direct impact on car prices. The hosts discussed how tariffs might lead to increased car prices and the ripple effects this can have on both consumers and car manufacturers. They explored the implications of "on-shored" car manufacturing and the potential for future savings if tariffs lead to more domestic production.
  3. S&P 500 Projections: A Closer Look: Goldman Sachs is not only revising recession odds but has also adjusted their targets for the S&P 500, predicting a target of 5,700 by the end of the year. The current levels suggest a possible pullback from these lofty expectations, indicative of a potentially bumpy ride ahead for investors in the stock market.
  4. Doge and Its Role in Inflation Conversations: The episode touched on the cryptocurrency market, specifically Doge, and its perceived effects on inflation. With platforms like Truflation indicating real inflation rates, there's an ongoing discussion about the impact of reduced government spending and money supply on inflation, with Elon Musk frequently adding to the conversation.
  5. Inflation, Government Spending, and the Conspiracy Theories: Tony and Derek explored the idea that government spending cuts could have positive long-term effects on inflation. They discuss the need for identifying and eliminating wasteful spending, perhaps leading to a scenario where taxes could be lowered further. This spurred a conversation around conspiracy theories, notably how stopping wasteful spending could be more impactful than seeking arrests for corruption.

These topics provided listeners with a comprehensive look at current economic dynamics, drawing on expert insights and intriguing hypotheses about future fiscal and market conditions. Tune in to get the full scoop and hear Derek and Tony's in-depth analysis of these vital issues facing investors today.

This week on the Capitalist Investor, we're going to talk about Goldman Sachs and how they are increasing recession odds and also how the s and P500, their target is now 5,700. We're going to talk about tariffs and how they affect car prices. And then doge, we are going to figure out and talk about is this going to help with inflation or hurt inflation. These are the topics we're going to be talking about next on a Capitalist Investor. Hey, Tony, how's it going today? Good, man, good. Good Capitalist investor. We're back on back, back and better than ever because we, we had a small delay last week. You were on vacation. I was. And it's tax season, man. There's just a lot of things going on. So that's for sure. Yep. So we talked about in that intro, Goldman Sachs, they're predicting, you know, higher probability of recession and lower expectations for the s and P500. We're going to talk about tariffs and how they affect car prices. And then, you know, our daily, our weekly Doge. Yeah, Doge. Wherever it goes. Yeah, I like that. I like that. So what's, what's Goldman Sachs saying? Yeah. So, you know, I think this was kind of big news to, to start the week, you know, Goldman Sachs put out a bunch of stuff actually, and they increased the 2025 odds of a recession from 20% up to 35%. Okay. So, you know, I feel like, you know, sometimes these percentages, it's like, you know, draft grades after the NFL draft. You know, it's NFL draft season. So, you know, it's basically impossible to know, you know, how someone's going to do right after you drafted them. Yeah, yeah. I don't know if it is really moving the needle, you know, a 15 increase in recession odds, but it certainly got people's attention. Yeah. I mean, a lot of these Wall street firms are recasting because I don't think they were expecting, you know, President Trump to get on the MIC and say tariffs. And the market just starts freaking out because the market loves direction they want. They, they like predictability. And that is opposite of what you get from President Trump. Yep. Because a lot of analysts before 2025 started said, hey, we're looking at mid single digit returns somewhere in the, you know, the, the, you know, the mid-6000s, you know, which would give us like a 4 to 7% range. And there were not that many that were expecting a pullback. But it's kind of hard not to expect either. I'll call it flatness I know that's not a technical term, but like the market being flat or maybe even negative after 2s and P years that were up 20% each. Right. So based on what Goldman saying, based on where we started and where we could finish at 5700 on the S&P 500 today we're at 5600. Right. And maybe even lower, you know, based on the, where the market is going to open this morning. But we're down one and a half percent from, you know, we would be down from the beginning of the year to the end of the year. What they're predicting down 1%. We're down like 5, 6, 7% right now. So we gotta like think about where, or I should say, I'm sorry, we're probably, we're down about 5 or 6, 7% from the all time highs. Right. That's where we're getting into that correction mode. So what, you know, what happens, what happens if the tariffs are lifted though? I know we're going to talk about in the next section, but like the market's pricing these things in as a permanent staple forever. Right. And a lot of clients I've been talking to is saying, you know, time in the market's greater than timing the market. Right. And I don't think you want to miss the day where Trump said, ha, you know, I know it's not April 1st anymore, it's April 2nd, but I was just kidding. Right. And we're not doing anything and everyone rejoices and even some of the other countries like, oh, thank God, you know what, thanks. Thanks, Donald Trump. I'm going to lower our tariffs over here too. I don't know, you know, that's the rosy part, but everyone bakes in the worst case scenario. Yep. So, yeah, you know, I think we'll talk a little bit. We'll get into the, the nitty gritty of tariffs. And you know, I think one of the major segments everyone's concerned about is, is, you know, car makers, the autos. Yeah, so we'll get into that. You know, kind of. Also interesting, Goldman reduced the GDP target for the year from 2% down to one and a half percent. Yeah. And then also basically priced in three rate cuts, which I think would probably start to get some people excited and would also, you know, go into the quote unquote conspiracy that, you know, Trump's trying to lower rates so we can, you know, refinance or Trump's trying to, you know, lower long term rates so. We can, the treasury can refinance Debt. Exactly. Well, and then the other, other thing that's coming up, and I'm not going to really hone in on this, but stagflation, I just, yeah, keep on hearing about it. And what that really is, is muted GDP, you know, and if we're going from 2 to 1, like Goldman says, that's muted. Right. And then high unemployment. Well, we don't have high unemployment yet. I say yet. But you never know if, like, if they're going to cast all these tariffs and there's, you know, you're shrinking margins. You know, the first thing to go is normally, you know, human capital, you know, letting people go so that the margins can still stay where they need to be to be operational. You know, now we're also talking about inflation going from two and a half, three to up to. They're recasting at four. You tie all those three together and yeah, there could be a stagflation. It could be a stagflation environment. It could be. But let's move on to the tariffs because I got an idea on that. So how is this going to. I think the biggest thing that people see because it's such a big ticket item are cars, and people love their cars. But I, I believe we have the oldest, you know, car. You know, the average car on the street is like 12 years old. That's crazy to me. It just doesn't look that way. But I don't, I don't know, I just, I can't, I can't look at a car and just like, oh, wow, that's a 12 year old car, isn't it? Like, I just can't see that. Yeah, I mean, I was in, so I was in Orlando for, you know, during spring break, so lots of people there. But the rental car that I got was the biggest piece of rental car I've ever had in my whole entire life. It had, it was a Nissan, not a Nissan. It was the, the big, yeah, the big Nissan. I want to say the Armada. Yes, the Armada. Really? You didn't like that car, huh? Which is a nice car generally, but it had like almost 40, 000 miles on it. Like, you know, pre pandemic, you rented a car, it had like 500 miles on it usually, you know, and they had all the bells and whistles. This had no bells and whistles. I don't want to sound, you know, spoiled or anything like that, but it didn't even have automatic lights. So I drove in the morning a couple times and I didn't even have. My lights on getting flashed over there. Yeah, I did. So. So the, the age of cars is, is definitely noticeable. Yeah. And I also got, you know, you know, just from shopping around or whatever, there was several emails sent out by car manufacturers saying, you know, which is today, actually Liberation Day, as Trump says April 2nd. You know, they, they sent out an email basically saying, hey, we don't know how this is going to impact things, but it probably will impact price. And you wonder when it comes down to it, right. And you're facing it, you wonder if it might actually work. Right. Because if someone's buying a Mercedes, do they really care if they're paying 90,000 for it or 98,000? So I can understand that argument. I think I saw something on watches on my face, Facebook or something like, hey, like, there's gonna be a tariff on these watches. They're like, hey, if you're buying that kind of watch, do you really care if it went up two grand? I mean, seriously, you know, but so here's the thing. So, like, what did we have? Like Hyundai said they're gonna build. Be building a plant here. Yep. I had this conversation with a client literally a day or two ago. They worked for Toyota and they, when he retired, he bought their fleet of cars because they got cars really cheap. And then they bought them. Right. And they didn't. They financed them, but their financing is anywhere between. It's on average of six and a half percent. Some are five and one's eight. And they're like, tony, should we pay it off? And I'm like, oh, man, that is a high interest rate. But I'm like, why don't you. Let's pay off the ones that weren't built in United States. Because President Trump said, hey, if you buy an American car that was built in America, your interest could be deductible. Right. And I'm like, well, let's. If we're going to do this, let's pay off the car that's not built here because, you know, you're not going to be able to. And paying 8%. I'm like, let's attack the 8%. That's the one that's built. Like, that was an obvious. So like, let's try and let's focus on that one. But I'm like, let's just let a couple things shake out. But let's see how after April 2nd. But that was a thought like, hey, do I keep this car even though I'm paying 6% because the, the interest is deductible. It's something you have to dig a little bit deeper. Does that really going to make a difference? You know, standard deduction so high. Right. Can I dig out of that hole? Right. And it's not a hole, it's like actually a really nice, you know, standard deduction. But the one thing is, is that six of the top eight sales of cars in the United States are ex. You know, they're, they're imported. Imported, right. And we're talking Toyota, Hyundai or Honda, Nissan, Subaru, Hyundai and KIA. And Subaru. 90 or 73% of their sales are from American buyers. Like, holy cow, you might go out of business. But Toyota has the most volume by far. They're like over 2 million. The other five companies I mentioned it might be just around 2 million combined. Yeah, right. So Toyota is like that. I think it was like 20, 25 or 30% of their sales are based on United States sales. But they're just, it's a popular car around the world, you know, a Toyota, Honda. Honda's make great cars, but 60% of their sales are reliant on the United States buying them. So they have problems. Right. And the one thing that you can notice this year is the company, the, some of the stocks that are doing very well are the used car parts stores, autozone, oreillys. I know one of the companies that we recently bought was Genuine Parts, kind of under the radar, but they pay a dividend of like three and a half percent and they do the same thing as Autozone and O'Reilly. We kind of, my investment team kind of thinks that that's of value because they're only up one and a half percent when these other two are up 20. So I think it's more name recognition. But when you start diving into like the fundamentals, it could be a good value for like a stock that we recently bought in our stock portfolio. But let me finish on this and you can jump in, Derek. But what if we win the tariff war, right? So what, what would happen? And when I say when, it's like Donald's like, hey, I was just kidding, right? Like I got what I wanted from all these other companies, I throw out my hands. And what, like, and now we don't have all this stuff, I'd imagine the market's gonna rally like the dickens real hard. Yeah. And, but we're talking, you know, we're gonna have normalized prices that we were used to and maybe even lower prices on imports. You know, maybe, maybe they, maybe we just, you know, maybe we just have lower Prices, because now we're lowering our tariffs. And again, it's about margins, but there could actually be more volume on our exports, and that means more jobs if there can be a deal struck where it's like, hey, guys, stop taking advantage of us. Make our stuff cheaper to buy in your countries, and we'll remove what we just did. Yep. That's the premise behind it. It's not to make money. Yep. And that's. Then that's what just happened with Israel, I believe they basically just can't. That's what Trump wants to happen, that Israel canceled all the tariffs on, you know, U.S. imports. So there's no terrorists between those two countries now. Okay. So, so, yeah. And, you know, on shoring jobs again. Yeah, we've talked about this many, many times. You know, you can't have a robust economy and have, you know, and not produce anything domestically. Right. You know, so, and that, that's one of the major, you know, beefs with, with Canada right now is, you know, they're, they're, they're refusing to adjust, you know, their tariff situation on us and it seems to go back and forth depending on, on what news station that you're listening to. But, you know, the, especially the agricultural products and, you know, maybe we can, you know, close the topic on this. It, you know, Rolls, you know, I'm not buying a Rolls Royce, but Rolls Royce moved manufacturing back to the US I know some of those other car manufacturers are starting to do that. You know, that is, that is the point of these tariffs. Bringing jobs. Yeah. Bringing these jobs back. More car plants, more. That means more steel, more things that we can, we can use United States steel again. Right. Because we don't want to pay a tariff on the steel that's going to be, you know, imported. Right. Let's build it here and use it here. And, you know, it sounded like President Trump is willing to give tax breaks for using. Exactly. Right. You know, buying American. So we'll see how that plays out. Yeah. All right. What's new in the, in the, in the Doge. Yeah. But the Doge World. Doge Cage. So, so, you know, there's this website, I guess it's called Truflation that kind of tracks real inflation. You know, I've only noticed it recently because, you know, I've seen some stuff on Twitter, X or whatever, but that number is down to 1.8%. And, you know, you can pick your topic with Doge. There's, you know, so much that, that they're looking into, but just, you know, I think, I think we've been pretty consistent over the last couple years talking about the problem with inflation. Problem with inflation on energy too, specifically. That is, you know, in its truest form is just caused by an, you know, too much money chasing too few goods. So, you know, it was kind of brought up this week on, on one of the talk shows because Elon mentioned it a little bit. But reducing the government spending and the government waste and pulling money out of the money supply should definitely have a positive long term impact on inflation. So. Yeah. Will it curb inflation in the short term? No, it won't. It's actually going to hurt it in my opinion because if I make X today and now I gotta go buy a car, that's 1.25x. Right. What it used to be. Yeah, there's inflation there. Right. But again, we just talked about it, you know, build American. Buy American. What does that mean? Jobs. If we have jobs, we can buy stuff. And that's what our country is built on, consumption. But that will, I know we have higher wages, but that's going to create the ability for us to pay the higher cost. I mean, everything is going to be inflated to adjust for what we feel is a 25% increase on everything. But you look at some of these other tariffs that people have strapped on us and it's 25 is a low number. Exactly. Right. But this could cause people to just stop buying and will that comes, you know, you know, the recession fears. That's why. Right. If we just pause on buying anything, waiting for stuff to play out. Yeah, I might not buy a car for three months. Yeah. That's going to have a negative GDP impact. Right. And that might take a quarter or two to cycle through, actually. But it could also cause prices to come down so that they're more competitive. Right. They squeeze the margin, lower the price. And that's not good for anybody because now you're just, you're, you know, when you're squeezing margins for a corporation, you know, they got to make cuts somewhere and then, you know, you don't want to, you don't want to talk about it, but it's probably jobs. But down the pike, I feel that the result of all of this is from just printing money. It. Printing money out of thin air. This helicopter money we got during COVID there's $4 trillion, man. And it's probably more than that. Yep. Right. But here's, here's one thought and I got a conspiracy theory like after this, but hang on. Finding more government waste and cutting it out. I feel that that could actually justify lowering taxes from even this point going forward. Our taxes are historically low right now. And yeah, we're running a deficit because we don't know where the money's going. We can't identify where it is. And that's where my conspiracy theory question is going to come up. But if there is more money, if we can lower taxes even further, that puts more money at the bottom of my checking account. And if I have more money in my checking account, I can pay for the things that are higher because I am supporting America and American growth. So it's not just, hey, you know, like everything's more expensive and I'm, and I'm stuck. There is trickle down effects in other places that are being tried to be done in simultaneous areas. Yep. I mean make, make no mistake about it. And we've talked about this quite a bit too. You know, the, some of the pain we're going through now has been caused by, you know, the, the government essentially propping up the economy for the entire, you know, second half of last year. Yeah. And we were talking about it in real time too when you know, 90 of the new jobs added were government jobs. You know, just running giant deficits. And then giving people fake jobs is not a recipe for long term or. Sending, or sending, or sending people. Sending fake people real money. Where's that money going? Right. So, all right, let just really quick, we'll wrap up the show, but the conspiracy theory. Here's what I got for you. All right. You know, I like to read some of the things that the left is saying to help weed out what the right is saying. Like to see like, okay, these are what both places are saying, right. The one comment that I saw is they're like, okay, Doge, you, you're doing such a good job and you're identifying all of this corruption. Where are the arrests? I'm like, valid question, right? So I get, I gave it a little bit of thought and I'm like, okay, first and foremost, like they, they're honing in on these NGOs, these non government organizations, because that's where the money goes. And then it. But then you start listening to what Elon said. He goes, then it's spiderwebs. It says huge spider web. And it's like tracking the money, right? Like, hey, I paid this organization, but this, that organization now paid 15 other organizations to do XYZ. Right, right. And then there's, you know, Elon saying, well that's actually then sent across season and Sent back here in a briefcase. Yep. Right. But first of all, like, my, My, my battle on that is, first, it's a spider web. Like, they're not stupid. Like, hey, just dumped in this. They're not. It's gonna be very hard to find the money and where it actually goes if they've made up fake. So if they're paying people that are 150 years old in Social Security, you don't think they made up a shell company to dump into and it just. And then it goes bankrupt and you can't find anything. Right. But also, don't you think it takes time to build a case? I mean, you can't just be like, oh, man, you're arrested. Like, we found, you know, there's no red hand because they knew it was coming. You don't think they've been covering their tracks for the last two months? 60 days, 70 days Donald Trump's been in office and he brought out. You don't think these dudes are, you know, torching papers and severing bank accounts? Like, come on. That's definitely happening. Yeah. So I wouldn't be surprised. A lot of it just ends up in a dead end, you know, in a vacant. A vacant office somewhere. Yep. So, you know, honestly, arrests are a bit much to hope for at this point. Just stopping the waste is. Is a pretty good consolation. So, you know, we've been talking our whole careers about how Social Security is, you know, going to run out of money. That date just keeps getting closer and closer and, you know, seems a third of the country doesn't want Elon to, you know, find the corruption in the Social Security system. It's. It's really a pretty wild take, but it's something that I've been, you know, hoping for my whole life in government is, you know, that's. That's really my core belief. I want the smallest government possible. Yeah, I like your. I like that view. It's like, maybe we should. Maybe. Maybe we should just be thankful. Like, finding a. Finding a. Somebody getting fired or somebody getting arrested is probably the most unlikely. But how about just the wasteful spending stopping? Yep. Like, that's actually the goal. Right. So when he goes to jail, like, I guess that's icing on the cake if they were being bad. But good luck finding that person. Yeah, for sure. So good, Good. I like that take. I like that. Good view. All right, man. Oh, yeah. Well, the mugs. Yeah. So we had two good, Two good submissions. We got to work through them a little bit. One's more on a, on a retirement planning angle. And I have a really good idea and case example that I did with a client on pensions and, you know, lump sums versus pensions. And then, you know, the other one was like, we're going to have to do some investigating for getting a, you know, maybe subject matter expert in here to talk about something. Right. Whether it's taxes or planning or, you know, I was thinking maybe even get one of like, you know, we sometimes use private equity for some clients and maybe get one of the, you know, one of the reps in here to talk about the pros and the cons, because there is pros, pros and cons when you start working with alternatives. So those are some of my ideas. But if you have any ideas, submit them to us. Right. Yeah. Infowpconnect.com is going to help us figure out, you know, what. What's some stuff that we can bring to the show that's a little bit different than, you know, the. The headline news sometimes. Yep. For sure. So. All right, D. Take us home. All right, well, thanks for listening. Like Tony just said, hit. Hit us up with those show ideas or questions comments@infowpconnect.com and we'll talk to you next week. The opinions expressed in this podcast are for general information purposes only and are not intended to provide specific advice or recommendations for any investments, legal, financial, or even tax strategies. It is only intended to provide education about the financial industry, so please consult a qualified professional about your individual needs.