Market Bloodbath: Is This "The Big One"? | Lance Roberts & Adam Taggart

**Lance Roberts** (0:00)
I think it's pretty easy, this market could rally to 56, 5700, and that would actually provide you a pretty decent exit point to reduce equity. Now, let me be clear, I said reduce equity, not sell everything in the markets. There's some stuff in the market that is getting ridiculously cheap.

**Adam Taggart** (0:24)
Welcome to Thoughtful Money. I'm Thoughtful Money Founder and your host, Adam Taggart, welcoming you back here at the end of another week. And what a week. I am joined as usual by my good friend, portfolio manager, the liberated Lance Roberts. Lance, how are you doing?

**Lance Roberts** (0:41)
Feeling liberated, it's awesome. I don't know what that means, actually.

**Adam Taggart** (0:48)
Well, of course, that was a reference, folks, to Liberation Day.
That was President Trump's announcement of what was billed as reciprocal tariffs. Really, how it manifested was actually quite different than many people expected, certainly different than what Wall Street expected. We had a bloodbath in the markets yesterday, looking like it's going to be surpassed today. Lance and I were recording this on Friday morning. Lance, when I just peaked, the S&P was down something like four and a half or something like that. A lot of deep red on the screen. So Lance, I guess the question everybody has for you is, what's going on? Is this the big one or will this too pass?

**Lance Roberts** (1:32)
Well, this too shall pass, obviously. There's a difference between an event-driven correction, which is what this is. We have an event that's driving a correction versus an economic recession or a financial crisis or something. We all have a financial crisis going on. But what we do have is this whole event driven around tariffs. And again, we can get into kind of the details today of all these tariffs. But they were worse than expected. They were not really tied to any type of reciprocal tariff.
It was poorly done and poorly executed. And now it's left the markets in a real state of kind of unknown address. And now China, as opposed to what was expected, again, everything is working against expectations. Expectations were that tariffs were going to be somewhere between 10 and 20 percent, not 34 percent, like on China as an example. They also didn't expect that China would retaliate and come back with a 34 percent reciprocal tariff, which is what we put on them, as well as an export ban on certain materials. Now, we can talk about the details of that. This is China negotiating, putting themselves in a position to negotiate. But this is all far beyond what the market was set up for. So the markets are responding accordingly, because again, this is all going to have major, major impacts to earnings revisions over the next 12, 18 months.

**Adam Taggart** (3:12)
All right. So we'll go through the technicals. I think the big question that everybody has on their minds, which obviously, Lance, you can't answer, but you can speculate, which is, when is this going to end? But a couple of things. One, folks, so at this point, at least as a recording, the S&P is now down about 15% from its high earlier this year. It's all-time high. Nasdaq's down 20%, so Nasdaq's officially in correction now. The tenure is under 4%.
So, all right, Lance, we'll look, I guess before we pull up the TA there, you and I did a real-time event yesterday. You're not thrilled, I think, about the logic behind these. Why don't you explain, if you can, just real quickly why you think the calculus that was used, the calculations that were used for the tariffs that we put on these countries was flawed? Why we shouldn't be using a trade deficit as a proxy for reciprocal tariffs?

**Lance Roberts** (4:27)
Well, the trade deficit doesn't have anything to do with tariffs.
Just one of the things that Trump administration is taking some slings and arrows for is that we tariff the island of McDonald, which the only people that live there are penguins. So what tariff did penguins put on us? And look, that's an outsized example, right? But it's the point that somebody didn't do their job when they went to Trump and said, hey, here's our tariff, you want to do tariffs, here's our plan to do it, we're going to do this. Somebody should have picked up on the fact that the island of McDonald doesn't have any people on it to tariff, right? So we just impose a 10% tariff on an island that can't pay it, right? So it's just ridiculous. So but tariffs are a tax or a VAT, a value added tax put on a specific good or service that's imported or exported from a country. So for instance, if we, you know, we talked about Japan, Japan has a 700% tariff on US rice because they want to protect their rice farmers in Japan. Look, Japanese rice is far better than American rice any day of the week. But, you know, this is Japan's point. So if you wanted to do a reciprocal tariff, what it should have been was a 700% tariff on Japanese rice coming into the US. Or if we tariff butter or dairy products or anything like that, this should have been an item to take in each country that you want to tariff, item by item, look at what's actually being tariffed and then apply a reciprocal tariff. That's what Wall Street was expecting. The trade deficit doesn't have anything to do with tariffs. That's just the difference between what we import to a country and what we export from them. And there's some countries that we should run a trade deficit with. They're simply that they don't really manufacture anything that's, or sorry, we don't manufacture things that they particularly need. These are in poorer countries in particular.