'Buy-the-dip' era ends: Markets plunge, nearly $10 trillion wiped out
NEW YORK (April 7) Markets are flashing distress signals after nearly $10 trillion in global market value evaporated in recent days amid President Donald Trump's escalating tariff threats against China, according to financial analyst E.B. Tucker, editor of The Tucker Letter, in an exclusive interview with Kitco News.
On Monday, global markets plunged sharply as Trump threatened to impose an additional 50% tariff on China by Wednesday if Beijing does not immediately withdraw its retaliatory duties. The S&P 500 swung dramatically, posting intraday volatility of up to 7%, while the CBOE Volatility Index (VIX) surged above 60 overnight – levels last observed during the 2008 financial crisis and the 2020 pandemic crash. Gold also briefly dipped below $3,000 an ounce despite recently hitting all-time highs.
"The stock market got to $66 trillion in value – that's like four times what it was in 2010 when Bernanke told everybody he was going to make the markets levitate," Tucker explained. "Your house value and your 401k value would control your mood… You'll be well-behaved if you feel rich. And it worked. But now we have a new regime, and everybody seems to think there's going to be another buy-the-dip. There's not going to be."
Tucker emphasized that tariffs are merely the catalyst, not the root cause of the market turmoil. "The whole entire thing is centered on China," he noted. "Everything else is just a bunch of noise. There's an interest in having a serious Cold War-type relationship with China. A lot of tariffs put in place targeted countries where the Chinese were shipping goods through to the U.S. market."
Beyond geopolitics, Tucker identified a fundamental shift in market psychology and monetary policy. He highlighted that investors have largely ignored warnings, remaining overly exposed to high-risk assets dependent on continued government stimulus and easy monetary policy.
"There's what people say and then there's what they do," Tucker remarked. "They were talking about how the government should get smaller… but they were fully exposed to stocks, options, private placements—super risky stuff dependent on government spending and the Fed's balance sheet growing."
According to Tucker, the Federal Reserve's ongoing reduction of its balance sheet, the first in 15 years, marks a pivotal turning point. "You had levitating asset values to make everybody's mood stable," Tucker explained. "Now you have a group of people saying, 'We're not going to do that.'"
Tucker urged investors to adjust proactively to the new financial landscape rather than relying on outdated strategies. "If you want to survive and thrive in a financial system trying to control you, you have got to recognize when the wind has changed," Tucker advised. "You should have done what Bernanke told you in 2010, and you should do what the current regime is telling you today."
Addressing gold's stability amid market volatility, Tucker said, "$3,000 is a good price. You don't really buy gold to make a bunch of money; you buy it as a percentage of your assets to manage your wealth… It creates a stable base to take other risks."
For investors seeking defensive strategies, Tucker pointed to stocks such as O'Reilly Automotive, which he believes will benefit significantly in the current economic environment. "You're not going to replace your car, you're going to fix it. And when you need parts, you're going to O'Reilly," Tucker said. "The CEO told me, 'Our philosophy is hard times make good habits.' I think O'Reilly is extremely interesting and boring."
Looking ahead, Tucker predicted a significant shift in market dynamics by year-end, warning investors to brace for a more subdued financial environment. "Things are going to be much smaller and it's going to shock people," Tucker concluded. "It means deflating the pile of assets that's out there. It also means that there's going to be a core base component of the U.S. economy that's going to do better—things that make real stuff."
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