Gold continues to make new highs. Soft commodities and materials climb a wall of worry and foreign equities rise from the dead. It is all part of a market mindset that a tariff war is right around the corner.

 

As April draws near, President Trump continues to reiterate that he is planning to levy tariffs on America's trading partners. Investors are worried. Given Trump's predilection toward hyperbole, the markets are unsure whether to take his statements at face value. He has used threats to get what he wants on so many occasions that April could come and go without any tariffs at all. What to do?

 

The move higher in some commodities is largely a tariff hedge that the president isn't bluffing this time. Tariffs would make the price of materials, food, and other goods rise here and abroad. Many companies during this week's earnings results warned that tariffs, if levied, would hurt profit growth. The mega-retailer, Walmart, although announcing strong corporate sales and profits on Thursday, sounded the same word of caution. They gave a downbeat outlook for the remainder of 2025 if tariffs are levied.

 

More than ever, investors are rushing into precious metals as a haven. Gold and silver have been rising for months as individuals, institutions, and central banks buy every pullback. Back in September 2024, I advised readers to buy any dips in precious metals ("Precious metals normally fall in September"). Over the last 14 months, gold prices are up 50 percent with gold's market cap now at $20 trillion.

 

This week, geopolitical tensions have risen (not fallen) as American envoys met with Russian representatives in the first of a series of peace talks. The three-year war of attrition was upended this week when the president seemingly switched sides in the ongoing conflict. 

 

Investors fear that any peace treaty would be short-lived if America abandons support for Ukraine. The possibility of a wider future war in Europe with nuclear implications, absent any U.S. influence, has markets on edge. After all, radioactive fallout knows no boundaries.  However, many American voters and much of the media they follow have been cheered by Trump's initiative and willingness to end the conflict quickly regardless of future consequences.

 

While this has created shockwaves among some, especially among our European allies, it is no surprise to me given what I know of populist movements throughout U.S. history. Authoritarian leaders are springing up throughout the world. Those same trends are rising to the surface in political elections throughout Europe In the case of the European Union,  it remains to be seen how this conflicted group of nations will respond to the administration's overtures to Russia.

 

In the meantime, switching gears to the world's second-largest economy, China, the news is better than good. On May 7, 2024, I wrote, "The Chinese Market is on a tear," pointing out that Chinese equities were cheap. Monetary and fiscal stimulus by the government was and is ongoing. Despite American investor's "uninvestible" attitude, I liked what I saw. I even posited the notion that Trump, if elected, was the ideal person to make nice with the Chinese. After all, it was his first term's tariff war that started the Chinese bashing in the first place.

 

In January of this year, in "Trump and the China Trade" I advised readers that China could be the ultimate Trump Trade. Fast forward to today and what have we discovered? On Thursday, a Bloomberg headline stated that "Trump says new China trade deal is possible despite tensions."

 

This week, the  'uninvestible' crowd — Morgan Stanley, Goldman Sachs, JPMorgan Chase & Co., and UBS Group AG — turned bullish on China and its stock market. Of course, the stock market is up 20 percent from my January column but better late than never, I guess.

 

Over the past 10 days, the S&P 500 Index has seen multiple intra-day pullbacks in which traders bought the dip seven times. At the end of the week, the S&P 500 gave way to the uncertainty that seems to be around every corner. I have seen this playbook before. Don't fall victim to the "what ifs." Continue to buy the dips.

 

Bill Schmick is the founding partner of Onota Partners, Inc., in the Berkshires. His forecasts and opinions are purely his own and do not necessarily represent the views of Onota Partners Inc. (OPI). None of his commentary is or should be considered investment advice. Direct your inquiries to Bill at 1-413-347-2401 or email him at bill@schmicksretiredinvestor.com.

At last count, the federal government owns 28 percent of the total land in the U.S., and under the surface of that real estate lies a wealth of oil, gas, and coal. Does selling off federal assets make sense in this era of downsizing government?

 

President Donald Trump plans to shrink the federal government through firing, hiring freezes, and layoffs. The only personnel spared are those in military enforcement, national security, and public safety. Everything else is fair game.

 

Earlier this month, regional managers at the General Services Administration (GSA) received memos from headquarters directing them to terminate the leases on approximately 7,500 federal offices across the nation. By doing so, the goal is to save upwards of $100 billion. This could be just the first step in a wider effort to raise additional capital through asset sales.

 

In the president's first term, Trump, the real estate mogul, once suggested that we sell off some of our U.S. assets and pay down part of the debt with the proceeds. He was specifically speaking about energy assets, but the U.S. also owns roads, railroads, infrastructure, levees, dams and hydroelectric facilities among other assets, such as the rights to mineral and energy leases from which the government receives royalties, rents, and bonus payments.

 

No one really knows how much these assets are worth but from time to time some organizations have taken a stab at valuation. In 2013, the Institute for Energy Research estimated the value of federal land and energy resources at around $200 trillion. That is a good round number that would more than solve our debt problem — if only it were true.

 

The problem is that the IER study used gross resource values. They assumed oil was worth $100 a barrel but ignored the cost of finding, extracting, and transporting oil to a refinery. If all those above costs were subtracted, the government's share came to about $9 a barrel. That is not counting the fact that 80 percent of the government's oil is in shale, which is the most expensive to extract.

 

Our coal resources are another good example. Federal coal reserves in the contiguous 48 states represent 1,300 years of American coal consumption. How much will companies be willing to pay for any part of that supply when the U.S. industry is moving away from coal as a source of energy?

 

In 2015, the Bureau of Economic Analysis estimated that the 464 million acres of land the government owned in the contiguous 48 states was worth an average of $4,100 per acre. That amounts to $1.8 trillion. The problem here is that about one-third of that acreage is national parks, wilderness areas, and wildlife refuges. Selling off those areas would be a political hot potato, even for Republicans. Millions of other acreages are either alpine or desert tundra.

 

Other uses like timberlands are not fetching anywhere close to the average acre price nor is agricultural land used for grazing cattle and other domestic livestock. The U.S. has 1.1 billion acres of prime private land but only uses 350 million acres to grow all the food we can eat, feed our livestock, export food, and grow corn for ethanol. 

 

The most likely use of some of the land could be for low-cost housing or second homes. That would be problematic since most of the government-owned land is in Alaska and in western states where demand for housing is far less than in other regions where the population is far greater. 

 

All in all, while an intriguing idea, selling off our energy and land assets would probably not make much of a dent in our $36.22 trillion debt. The few organizations that have estimates of asset sales over the last 5-10 years believe land and energy rights would fetch no more than $2 trillion to $4 trillion. Even if we double that total, selling these assets doesn't seem to be worth the effort involved when the real problem is overspending.

 

Bill Schmick is the founding partner of Onota Partners, Inc., in the Berkshires. His forecasts and opinions are purely his own and do not necessarily represent the views of Onota Partners Inc. (OPI). None of his commentary is or should be considered investment advice. Direct your inquiries to Bill at 1-413-347-2401 or email him at bill@schmicksretiredinvestor.com.

For the fourth straight month, the Consumer Price Index registered higher inflation. That has dashed any hope that the U.S. central bank would loosen momentary policy further in the months ahead. And now the country faces even higher prices if tariffs go into effect.

 

The most recent University of Michigan survey of consumers indicated that inflation expectations for the next year increased to 4.3 percent in February. That is one percentage point higher than January and the highest since November 2023.

 

Wednesday's Consumer Price Index (CPI) data for January increased 3 percent over the prior year and 0.5 percent over the previous month. That surprised markets but came in spot-on with my forecast. As readers are aware, I have been warning investors since October that inflation was climbing, and it has done so for the last four months.

 

While a stunned Wall Street pointed to seasonal factors as the culprit, we all know that is a load of bull dinky. The latest inflation numbers were higher in almost everything: autos, insurance, drugs, rent, housing, education restaurants, groceries — the list goes on. On Thursday the Producer Price Index (PPI) echoed the increases in the CPI with  U.S. factory gate prices rising 0.4 percent month over month.

 

Jerome Powell, chairman of the Federal Reserve Bank who was testifying before the House as the numbers were announced, admitted that "we're close but not there on inflation." He had already advised the market not to expect rate cuts and reiterated that "we want to keep policy restrictive for now."

 

With no help from the Fed, where does that leave the markets? Waiting for Donald Trump's tariff onslaught. There are relatively few in the financial markets who believe that tariffs will not add fuel to the inflation fire. Since the election, even the president and his cabinet have admitted that Americans will feel "pain" in the short term from his policies.

 

It may be why he did not implement reciprocal tariffs on foreign nations on Thursday. Instead, he signed a memorandum to "review" such tariffs. That gives him time to negotiate with our trading partners without adding tariff pressure to the inflation rate.

 

Critics also say government spending has been a big part of U.S. economic growth. If you add up lost federal jobs, declines in immigrant labor, and the fallout from the reduction in the size of government overall, the impact on the economy will result in a period of slower growth. In which case, my forecast of a bout of stagflation will prove accurate.

 

However, before you run for the hills, there may be some silver linings in these storm clouds. Peace in the Middle East and between Ukraine and Russia would go a long way in reducing the price of oil. And oil, as you know, is a big factor in the inflation equation. Energy prices have declined for several weeks, and I expect that to continue. It is one reason I see a decline in the CPI for next month.

 

I also believe Trump's tariff strategy is a means to an end and not a permanent fixture in the global economic landscape. He was elected primarily to solve inflation and while he can still blame this month's spike in inflation on Biden, he can't do that forever.

 

Looking back through history, voters in populist times have a short fuse. They expect politician's promises to be kept, and soon, especially when it comes to bread-and-butter issues like groceries. The pressure to succeed in a trade war needs to be weighed against the damage it causes on the inflation front.    

 

And yes, we may see a dip in economic growth because of reduced spending and increased efficiency throughout the government but it should also put a dent in the deficit and hopefully reduce the country's debt load.

 

The stock market appears to have taken the hotter inflation news in stride. However, I think much of the gains this week had more to do with the delay in reciprocal tariffs rather than inflation fears. Was it an accident or leaked information on tariffs that turned the averages around on Wednesday as they plummeted after the CPI print? The S&P 500 Index climbed further on Thursday completely ignoring the hotter PPI.

 

In any case, I have repeatedly warned readers not to tariff trade. President Trump has a long history of using the media to broadcast one intention while doing the exact opposite behind the scenes. My buy-the-dip strategy over the last few weeks seems to be paying off as has my recommendation to buy China and precious metals. Volatility will remain the game but, I am looking for new highs in the days ahead. 

 

Bill Schmick is the founding partner of Onota Partners, Inc., in the Berkshires. His forecasts and opinions are purely his own and do not necessarily represent the views of Onota Partners Inc. (OPI). None of his commentary is or should be considered investment advice. Direct your inquiries to Bill at 1-413-347-2401 or email him at bill@schmicksretiredinvestor.com.

Scott Bessent, the nation's new Treasury secretary, is a product of the investment world. His private sector background brings to the government a different set of tools and ideas that may lessen the burden on the Federal Reserve Bank in its fight against inflation.

 

For decades, politicians of both parties with few exceptions have left it up to the Federal Reserve Bank to curb inflation while maintaining employment. It has been a tough job, especially when fiscal policy is working at cross purposes with their mandate. The fly in the ointment over the last several decades has been that while the central bank has been largely insulated from political pressures and has functioned independently, the Treasury is not. It answers to the president and through him his political party.

 

Fast forward to today. Most readers know that the government has a big spending problem. At the same time, over the last four years, we have witnessed a rebound in inflation that climbed to as high as 9 percent. Massive spending programs made inflation far worse.

 

The Fed's job was to reduce inflation, so it hiked interest rates while reducing the number of government bonds it purchased. It has been a long fight to quell inflation, and it is not over yet. It would have been easier if Congress and the president were willing to reduce fiscal spending. Nonetheless, the Fed had made enough progress despite the fiscal failure to cut spending, that in September of last year, the central bank was able to cut interest rates for the first time in four years. They reduced the Federal Funds short-term interest rate by 25 basis points.

 

The way it works is the central bank has the power to cut interest rates on securities on the short end of the yield curve like notes, bills, etc. but not on the long end where the yields on the 5-10-20-30-year bonds are determined by the market in general. Normally, when the Fed cuts rates on the short end, bonds of longer-dated maturities fall. This time around that was not the case.

 

The U.S. Ten-Year Treasury bond, and bonds of lengthier maturity, failed to follow short-term bills and bonds. In fact, although the Fed has cut interest rates several times since then, longer-dated securities have risen in price. Why?

 

Government spending remains out of control. The nation's deficit and debt are at record highs. If that situation continues, the bond market will continue to demand higher and higher interest payments to buy Treasury bonds. It appears the Fed can do no more in the face of the prolific spending by our elected officials.

 

Unlike other politicians, Bessent understands the problem. He said last week that "we are not focused on whether the Fed is going to cut." Instead, he wants the Trump administration to reduce the yield on benchmark Ten-Year U.S. Treasury bonds through fiscal actions.

 

He knows that the interest rates Americans pay on mortgages, credit cards, and other kinds of loans are based on the 10-year Treasury yield and not the Fed Funds rate.

 

Instead of leaving it up to the Fed, which is pushing on a string at this point, he wants to cut government spending that is a major source of inflation, debt, and the deficit. He also hopes to sustain economic growth at a 3 percent rate by cutting regulations and boosting energy production by 3 million barrels a day of oil equivalents. That would also raise tax revenues.

 

If he can accomplish that, then the bond market will take care of long-term rates all by themselves. If bondholders see that the deficit and government debt is coming down, then buying and holding long-dated Treasuries will be less risky. To me, it is the first practical plan I have heard to reduce the national debt which has become the nation's number one challenge on the economic front.

 

Bill Schmick is the founding partner of Onota Partners, Inc., in the Berkshires. His forecasts and opinions are purely his own and do not necessarily represent the views of Onota Partners Inc. (OPI). None of his commentary is or should be considered investment advice. Direct your inquiries to Bill at 1-413-347-2401 or email him at bill@schmicksretiredinvestor.com.

Two Mondays in a row, investors have had an opportunity to buy the dip in the stock market. In February there may be even more chances to do so depending on geopolitical developments.

 

For the source of much of this week's volatility, one need look no further than the White House. The number of executive orders has ramped up further. On-again, off-again tariff talks sent traders into despair, and then giddiness.

 

In the few hours between daily press conferences and announcements, markets held their breath with one finger on the buy button and the other ready to sell. If you throw in geopolitical news on topics such as Gaza, Greenland, Panama, Iran, Ukraine, and more, it is no wonder that the currency, bond, and commodity markets are churning as rapidly as the stock market.

 

Tariff fears last weekend saw stock futures on Sunday night swoon. The small-cap Russell 2000 Index futures were down 4 percent at one point. The same thing occurred the previous Sunday night when DeepSeek, the Chinese AI company, triggered a steep decline in technology and other index futures that carried into the next day's trading. But the markets rebounded quickly thanks to individual investors at the vanguard of the dip buying.

 

"Buying the dip" is alive and well among the retail crowd. On Monday, they purchased over $4 billion worth of stock options and equity. There is an entirely new generation of younger traders, forged during the COVID-19 decline in the markets, who have emerged with a different perspective on investing. 

 

Years of easy money by the Federal Reserve Bank and bucketloads of government spending have taught these investors that buying pullbacks was the way to go. Fundamentals matter less and momentum much more. Rapid rebounds in stock prices have encouraged this practice. Combined with what they call the "Trump Pump," animal spirits are lending even more volatility to the markets.

 

I have tuned out much of the political noise since the election and have concentrated instead on the economy. Here is what I am seeing.

 

The dollar is peaking because the threat of tariffs is on hold for now (except for the 10 percent tariff in China). The weaker dollar has driven down bond yields and that combination has been great for gold. Gold is reaching new highs daily. At the same time, the economy seems to be softening a wee bit while inflation is rising a tad.

 

Friday's non-farm payroll report was weaker than expected raising fears that employment is falling. I am expecting inflation to be above 3 percent year over year when the January data is released. That situation is creating a mild form of stagflation, something I predicted would happen this year, but it won't last long.

 

I expect February's inflation will decelerate to 2.85 percent based on the decline in energy we see today, while the economy continues to slow. Lower oil prices will help ease inflation if it continues to fall, which is part of the president's game plan. At the same time, our new U.S. Treasury Secretary Scott Bessent, a successful hedge fund manager, has an entirely different private-sector approach to inflation, interest rates, and economic growth.

 

The wild cards, however, are still unanswered. How will the next round of tariff threats play out? Will China and the U.S. make a deal? Is the European Union next on the list of Trump tariff threats? Do Mexico and Canada come back for a second round of tariffs?

 

I wish I had the answers, but I don't. What is clear is that the financial markets do not like uncertainty. It tends to create volatility of the kind we have been experiencing thus far in 2025. That should continue. The days of straight-up are over for the time being. Instead, we should experience ups and downs for some time. Despite that, I remain positive on the markets so buy the dips. 

 

Bill Schmick is the founding partner of Onota Partners, Inc., in the Berkshires. His forecasts and opinions are purely his own and do not necessarily represent the views of Onota Partners Inc. (OPI). None of his commentary is or should be considered investment advice. Direct your inquiries to Bill at 1-413-347-2401 or email him at bill@schmicksretiredinvestor.com.