The majority of all markets are down. In fact, in the month of February, there were basically no markets that saw a green month.
Fast forward just a little bit—the S&P has nearly dropped 3%, the NASDAQ has plunged 4%, and some of the biggest stocks in the market right now are down double digits for the year. For example, let’s look at Nvidia, down 22% year to date. Or better yet, a known favorite – Tesla – down 41-43% year to date. Or Palantir, down 35% in just the last month.
So, what’s going on?
One of the biggest headlines that shook the market yesterday was Donald Trump saying he wouldn’t rule out a recession:
“I hate to predict things like that. There is a period of transition because what we’re doing is very big. We’re bringing wealth back to America.”
That statement alone added fuel to the fire, increasing the fear in an already very nervous market. And there’s a very interesting theory circulating—some people believe Trump is intentionally tanking the stock market.
I’ll break that down in just a moment, but first I want to look at the overall market sentiment.
Extreme fear is taking over.
The Fear and Greed Index isn’t just showing fear—it’s flashing extreme fear across multiple indicators:
- Market momentum: extreme fear
- Stock price strength: extreme fear
- Put and call options: extreme fear
- Market volatility: extreme fear
- Safe haven demand: extreme fear
There’s no doubt about it—investors are scared. And when fear takes over, markets tend to overreact.
I could sit here and tell you this is the worst thing to ever happen, that everything is going to collapse, and play into the fear narrative to keep you watching longer—but I’m not going to do that.
This channel is here to give you the truth and help you stay on track when you’re making decisions in an uncertain market—and most importantly, to help keep you prepared.
With that being said, let’s talk about the three biggest reasons why the market is dropping right now—and whether or not you should be panicking.
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The Tariff Game is Back On
There’s a back-and-forth battle over tariffs, and it’s creating massive uncertainty in the market. One day, tariffs are off. The next day, they’re on. And if there’s one thing markets hate—it’s uncertainty.
Every time a new tariff gets introduced or removed, investors panic. It disrupts supply chains and fuels speculation about a potential economic slowdown.
But here’s the thing: while tariffs do have an economic impact, the fear and hype around them are often exaggerated.
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Overvaluation of the Stock Market
Another important factor to consider is how overvalued the stock market really was.
If we just pull up the S&P 500 and look at it logically—you’ll see it’s just been up and to the right. And every time there’s been a shakeout, it’s strongly recovered shortly after and pushed to new highs.
But this is not 100% predicated on strong economic data. In fact, much of the economic data over the last few years has been relatively poor—and in some cases, manipulated or skewed to produce better-looking numbers.
To put it into perspective: over the past year, the stock market has hit all-time highs over 20 times. Because of that, investors were already expecting a pullback. Now, every piece of bad news triggers an exaggerated reaction—making people ask, “Is this the big one?”
This overcompensation leads to emotional decision-making. Many investors are selling off positions out of fear rather than logic.
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The Trump Conspiracy Theory
Remember the theory I mentioned earlier about Trump? Here it is.
Trump made headlines saying, “I don’t rule out a recession.” That’s not exactly a message you’d expect from someone trying to inspire confidence in the economy.
So why would Trump say that?
Let’s look at the bigger picture. In 2025, the U.S. Treasury has to refinance about $7 trillion in maturing debt. That’s a massive amount of money, and the government wants interest rates to be as low as possible to keep those payments manageable.
Think of it like a mortgage. If you refinance at low interest rates, your payments are cheaper. But if you refinance at high rates, your payments skyrocket.
There’s a theory that Trump is intentionally driving fear and uncertainty into the market to pressure the Federal Reserve into cutting interest rates. If the Fed lowers rates, it becomes easier for the government to refinance its debt—and it could stimulate the economy.
It’s a bold move. But if it works, it could lead to a massive rally across almost all markets.
So, what does this mean for you?
Do we actually know what’s going to happen? Is this just a shakeout? Are we missing potential gains?
Personally, I feel like the economy has been kicked down the road so many times to avoid a recession that now, something might actually be necessary—for the overall health of the economy. And that “something” could be a pullback—maybe even a recession.
I think we’re well overextended in many asset valuations, and a lot of things aren’t making sense. So many stock PE ratios are completely out of whack. Some companies don’t even make a profit—yet they’re trading at sky-high valuations.
What Am I Doing About It?
I’ve taken a lot of money off the table. I took profits where I could, and I closed out losing positions.
But my main focus right now is using a market-neutral strategy.
Why? Because whether the market goes up or down, I can use a tool that helps me generate alpha during that time. For example, last month in February, everything was bleeding—and still kind of is—but the market-neutral trading software I’ve been using actually returned over 5% in gains.
Meanwhile, everyone else was panicking about the pullback.
So I’m deploying more capital into that strategy. Because if we don’t have a tool that can help us perform while the market is going down, how can we expect to get ahead?
Of course, you could just sit in cash. But the risk with that is if the market recovers and runs hard, you’ll have to buy back in—usually at a higher price than where you sold. That’s the opposite of dollar-cost averaging.
If you want to learn more about market-neutral strategies, just hit the link in the description.
And if you want to stay up to date on what’s happening in the markets as we head into 2025 and beyond, be sure to subscribe to this channel so you can stay informed.
Like always, my friends – peace.
