The S&P 500 (^GSPC 1.16%) has marched upward like a man in a trench coat, humming a tune no one understands. Fifteen percent year to date-bold, even for a market accustomed to chaos. But what’s a stock index to do when a man with a megaphone insists the world owes him a trade war? Investors, bless their collective hearts, are receiving letters they didn’t ask for.
- President Trump claims foreign exporters will “absorb the tariffs.” A charming lie, like saying the moon is made of cheese. Goldman Sachs, that grumpy old sage, insists U.S. companies and consumers are paying 82% of the duties. So it goes.
- Trump dismisses inflation as a “hoax.” Inflation, meanwhile, has been sipping coffee in the corner since April, smiling like a cat with a secret. Prices rise. Wages stall. The joke’s on us.
- Trump promises tariffs will strengthen the economy. JPMorgan Chase, that grizzled old bear, lowered its growth forecast by 0.2 percentage points. So it goes. Tariffs: the economic equivalent of painting the Golden Gate Bridge pink and calling it “vibrant.”
This week’s news arrived like a thunderstorm during a picnic. The S&P 500, already bloated with speculative fervor, now faces a double whammy: Trump’s tariffs and a valuation that makes even Warren Buffett shrug.
Jobs, Unemployment, and the Illusion of Prosperity
The White House released a “fact sheet” claiming tariffs will grow the economy by $728 billion. It’s the kind of number that makes you believe in miracles-if only the miracle were a spreadsheet error. The study came from the Coalition for a Prosperous America, a group with the same impartiality as a man selling insurance on a sinking ship. The World Trade Institute called it “highly unusual and empirically unsupported.” A polite way of saying, “You’ve been had.”
Meanwhile, the economy added 17,000 jobs per month over six months. That’s slower than a sloth in a board meeting. Unemployment hit 4.6%. Manufacturing activity fell for nine straight months. Susan Spence of the ISM said, “For every positive comment about new orders, there were 1.2 comments about tariff costs.” So it goes.
Consumers, those fragile creatures, now have the lowest sentiment since 1978. The Michigan Index averaged 57.6. That’s not just pessimism-it’s resignation. Two-thirds of GDP depends on them. If they stop spending, the economy becomes a soufflé in a hurricane.
The S&P 500’s Cosmic Warning
The S&P 500’s CAPE ratio hit 39.1. That’s not just expensive-it’s “bought the farm” territory. Only once since 1957 has the CAPE topped 39: during the dot-com bubble. And what happened then? A crash so brutal it made the Great Depression look like a nap. Here’s the math:
| Time Period | S&P 500 Average Return (CAPE Ratio 39+) |
|---|---|
| 1 Year | (4%) |
| 2 Years | (20%) |
| 3 Years | (30%) |
If history repeats, the S&P 500 will fall 4% in a year and 30% by 2028. Past performance is no guarantee of future results-but history is a lousy teacher. Investors, ever hopeful, might cling to AI as a life raft. Yet the real question is: Will the raft hold if the ocean turns to quicksand?
As a business historian, I’ve seen this movie before. Tariffs, bubbles, and presidents with megaphones. The plot never changes. Investors should buy only high-conviction stocks and hoard cash like a squirrel in a drought. When the next crash comes-so it goes.
History doesn’t repeat itself. It just rhymes. 📉
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2025-12-18 12:27