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☕️ Dead cat bounce or the start of another leg higher?

Apr 08, 2025

Howdy! 👋

The markets are in rally mode as I type.

Why?

Traders are getting on the gas because they want to get ahead of tariff deals. I am not sure it’ll stick but that’s just me… regardless, it’s proof positive that people want to buy (and imho, should).

I’m not surprised.

In fact, I mentioned yesterday on Varney & Co that, the “market is gone like a shot when (widely rumored) tariff deals get inked.” (Watch)

I hope you’re paying attention and have already positioned your money for one simple reason.

There may not be a second chance to get on board before the train leaves the station, especially if China comes to the table.

Remember Keith’s Rule of the Back Page… the biggest, best and potentially most profitable stories are almost always found on the “back page” where very few people are reading along.

1 – Dead cat bounce or the start of another leg higher?

Markets are up as I type in the early morning session. (Read)

Is this a dead cat bounce or the start of another leg higher?

If you’re not familiar with the expression, a “dead cat bounce”, it’s Wall Street Speak for a short-lived rally in an otherwise down market.

I could make the case either way.

As I noted this past weekend in Dallas during Friday’s bloodletting, I think that we may be very near a bottom even if it’s not the bottom.

Selling doesn’t happen in a vacuum.

What you need to understand about that is that every seller over the past few days has already found a buyer. And that’s almost always a precursor to a fresh run higher.

Don’t forget there’s ~$7.1T on the sidelines AND the big money is now flush with the pile of cash they pocketed from scared sellers last week.

Every smart investor should be thinking about buying stocks in world class companies capable of emerging far stronger on the other side of tariff tantrums including – I submit - many of the names we talk about frequently.

Quite a few are long time OBA faves, and still up in the high double or even triple digits off the last major swing lows they set. Hopefully, your portfolio is similar. If not, you know where to find me.

Big divvies are a bonus, too – and hopefully you’ve got a slew of those as well.

2 - Walmart Isn’t Just Competing — It’s Compounding

As recession fears mount and tariffs threaten margins, Walmart+ is quietly becoming a profit machine.

This isn’t new – in fact, I’ve been talking about this on TV, at presentations around the world and right here for months before the Tariff tantrums began.

Walmart’s membership program now accounts for nearly half of all U.S. e-commerce spend and is helping the retail giant grow profits faster than sales.

Subscribers aren’t just loyal — they’re high-value in every sense of the term.

They shop twice as often

Spend nearly 3x more than non-members

And Walmart+ Assist (for those on government aid) is driving strong new signups

Walmart is expected to provide updates this week at its Dallas investor event, including plans to lean further into membership, advertising, and other high-margin businesses.

I’ll be watching carefully.

You?

3 – Apple bleeds out but the markets are missing this

Apple has shed nearly $638 billion in market cap over just three trading days — a staggering 19% drop — as trade war fears ramp up.

Why?

Apple’s supply chain runs through China, India, Vietnam, and Thailand — all of which are squarely in the line of fire under Trump’s new tariff plans. The concern, of course, is that if those tariffs stick, analysts say Apple may be forced to raise iPhone prices just to keep margins intact.

Don’t bet on it.

People forget how powerful Apple is.

This isn’t just about iPhones anymore and hasn’t been for a long time. It’s about the future of health, payments, and AI — all flowing through a device people that is now so ubiquitous that 1 in 4 people on the planet can’t live without it.

I think Apple remains very misunderstood and very undervalued.

Trade Idea: LEAPs calls could be a super attractive way to play along at a fraction of the capital – ideally deep-in-the-money (DITM) calls — like the $100 or $120 strikes — depending on your capital, risk tolerance, objectives and circumstances (which I don’t know).

4 – Recession? Or is Fink talking his book?

BlackRock CEO Larry Fink said on April 7, 2025, that many U.S. CEOs believe the country is already in a recession. (Read)

A recent survey backs that up: 69% of CEOs polled in the days following Trump’s tariff announcement said they believe the U.S. is in a recession.

Fink also warned that Trump’s new tariff policies could drive inflation higher, making it much harder for the Federal Reserve to cut interest rates — despite market expectations of four cuts by year-end. Ummm, yeah.

In his view, there is “zero chance” of those cuts happening. Instead, he expects interest rates to stay higher for longer due to persistent inflation.

I wonder who’s talking their book… CEOs or Fink?

If you’re not familiar with that phrase, “talking your book” means pushing a view that aligns with your own interests. And let’s be honest, Fink’s got one helluva book.

Remember who’s doing the talking here.

Wall Street’s idea of “long term” is “until next bonus season.”

Trade Idea: Consider adding exposure to short-term treasuries or floating rate ETFs which could be a great defense if rates stay higher for longer.

OBAers, keep an eye on your email! 😀

5 – Bessent’s Bluff? China’s Playing a Different Game

Treasury Sec. Scott Bessent says China’s tariffs are a “big mistake” and claims the U.S. holds all the cards. “They’re playing with a pair of twos,” he told CNBC. (Read)

Maybe.

But that assumes the rest of the world folds.

Trump’s “reciprocal tariffs” plan is cranking up — another round of hikes drops this week. Over 70 countries are now reportedly in contact, looking to cut deals.

China’s not backing down. They’ve slapped 34% tariffs on U.S. goods and vowed to “fight to the end.” Trump’s now threatening 50% on Chinese imports.

MyPOV: I’ve spent a lot of time in mainland China over the years and my experience makes me think Bessent’s missing the bigger picture. China won’t just fight — it’ll charm. Expect a global PR blitz aimed at winning over the 85% of the world not named America.

The real risk and the one Washington isn’t counting on is that many countries around the world still want to do business with Beijing.

Keith’s Investing Tip: Invest because of China, not in China. China’s charm offensive will be one for the record books and that means profits could be, too.

How big a deal is this?

My favourite “because of China” investment choice is a global player and has returned 26.50% YTD while the S&P 500 has dropped -10.82% over the same time frame.

The Dragon is coming to dinner and the only choice you’ve got to make is whether you and your money are at the table or on the menu. Just sayin’.

Invest accordingly.