Month: April 2025

Good Morning Ladies and Gentlemen

”All the socialists understand about money is that they want it from others.”

Konrad Adenauer

The Gap

US consumer confidence has yet to recover from the downturn caused by the COVID-19 pandemic in spring 2020. In contrast, the S&P 500 has reached new all-time highs, leading to a widening gap between consumer confidence and the stock market. If consumer sentiment in the US does not improve over the year, the S&P 500 will likely continue to decline. Conversely, the emergence of a low in consumer sentiment could positively impact equity markets.

Predictability

President Trump’s unpredictable stance on tariffs continues to be a factor. This week, it seems he aims to close a deal with the Chinese government, which, of course, would be highly appreciated by market participants, importers, and exporters alike. In contrast, he imposed burdens on the pharmaceutical and chip sectors last week while seeking to support the automotive industry.

The Low

The US stock market reached a low point on Tuesday, April 8th, and it appears that market participants and the current U.S. administration have recognised this as a significant low point. Ever since, there has been lots of news (and little action), still signalling a potential upward trend. Additionally, the favourable seasonality characteristics of April also seemed to benefit the markets.

Notable Selloff

Nevertheless, this year’s stock market selloff has already become one of the most notable instances of “negative wealth effects” in absolute USD terms on record. While analysts have previously attributed consumers’ sustained spending to positive wealth effects, that rationale no longer applies. Furthermore, the impressive performance of the S&P 500 over the previous year and a half has essentially been reversed.

Conclusion

Finally, Ladies and Gentlemen, it seems to me that there is a growing and widespread sentiment that many politicians demonstrate a troubling inclination that their most outstanding talent is their enthusiasm to prioritise their fleeting (often temporary) ideas rather than focusing on developing more meaningful and enduring policy initiatives. Do others share this perspective, or is it just me who feels this way?

Debt

Eventually, we will have to have a thorough discourse regarding the escalating levels of debt observed in advanced economies because money is a scarce resource, and it seems not all of our elected officials get the idea. However, I would suggest deferring this subject for a later discussion.

Ladies and Gentlemen

Feel free to send your messages to smk@incrementum.li.

Many thanks, indeed!

I wish you an excellent start to the day and weekend!

Yours truly,

Stefan M. Kremeth
CEO & Head of Wealth Management
Incrementum AG – we love managing assets

Tel.: +423 237 26 60
Cell: +41 79 303 48 39
Im alten Riet 153
9494 Schaan/Liechtenstein
Mail: smk@incrementum.li

Good Morning Ladies and Gentlemen

”Peter Navarro is ‘truly an idiot’ and ‘dumber than a bag of bricks’.”

Elon Musk

International financial markets represent a significant approximation of a global consensus regarding economic perspectives. The collective knowledge and insights derived from these markets often surpass the understanding of the average political figure, investor, and journalist. In many instances, the predictions and sentiments of the financial crowd prove to be more accurate and insightful than conventional political discourse.

Mister Elon Musk

This week, Mr. Elon Musk delivered a somewhat surprising message on his online platform X, stating that Peter Navarro is “truly an idiot” and “dumber than a bag of bricks”. This comment indicates potential discord between the Tesla CEO and the President of the United States, particularly in light of the high import tariffs. The 75-year-old Navarro is regarded as a key architect of President Trump’s stringent protectionist trade policy.

Peter Kent Navarro

Who is Peter Kent Navarro? Peter Kent Navarro, born in 1949, is an American economist currently serving as the senior counselor for trade and manufacturing to the President of the United States since January 2025. He previously held key positions during the first Trump administration, initially as the director of the White House National Trade Council and later as the director of the newly established Office of Trade and Manufacturing Policy. Navarro is a professor emeritus of economics and public policy at the Paul Merage School of Business at the University of California, Irvine. He has also made five unsuccessful attempts to run for San Diego, California public office.

The Power of Creating a Crisis

Ladies and Gentlemen, much depends now on how the US government further manages import tariffs. Historically, bear markets often arise from specific triggers, such as the new economy bubble in 2000, the securitisation of mortgage loans during the financial crisis from 2007 to 2009, the COVID-19 crash in 2020, and inflation contributing to the bear market in 2022. If President Trump does not make significant adjustments to his tariff policy in the coming weeks, there is a heightened risk of a “2025 tariff recession”. What we saw from the White House yesterday may be the first step in the right direction.

What Truly Defines a Good Deal?

Carl Menger von Wolfensgrün, an Austrian economist, lived in Austria from February 23, 1840, until February 26, 1921. He is recognised as the founder of the Austrian School of Economics and the Austrian marginal utility theory, which brought a transformative perspective to the theory of value and prices. His economic theories concluded, among other insights, that in an environment of free and fair trade, the marginal utility derived from a transaction can exceed the individual value of the transaction object for each participating partner. In simpler terms, the total benefit of the exchange can be greater than the sum of its parts.

Conclusion

I firmly believe an agreement should mutually benefit all parties involved, and I like Carl Menger’s take on it. After negotiating a deal, one partner may feel the terms are no longer favorable. In such instances, it is entirely reasonable to consider renegotiation. However, resorting to force or leveraging supposed strength before negotiation is not a respectable approach to me. What is your take on this?

Ladies and Gentlemen

Feel free to send your messages to smk@incrementum.li.

Many thanks, indeed!

I wish you an excellent start to the day and weekend!

Yours truly,

Stefan M. Kremeth
CEO & Head of Wealth Management
Incrementum AG – we love managing assets

Tel.: +423 237 26 60
Cell: +41 79 303 48 39
Im alten Riet 153
9494 Schaan/Liechtenstein
Mail: smk@incrementum.li

Good Morning Ladies and Gentlemen

”Every champion was once a contender who refused to give up.”

Rocky Balboa

People often remain unaware of perspectives outside their bubble, a realisation that is not particularly new. Nevertheless, instead of responding with indignation to the Trump administration’s tariffs, I believe that global political leaders and the media should adopt a more nuanced approach to the current U.S. administration. They should prioritise alternative markets and, most importantly, focus on best-in-class products. While this transition may require time and could involve some painful adjustments in the short term, it ultimately has the potential to foster a more efficient, productive, and competitive economic landscape in many countries outside the U.S., thus leading to more resilience in the long run.

Shift in Mindset

Such a shift in mindset may enable us to refrain from primarily preaching morals and ethics in international trade, a practice Western politicians often feel entitled to. It also encourages us to redirect our attention towards trade and recognise that differing perspectives, regardless of their underlying reasons, can be valid in other countries.

My Take

The Dow Jones Transportation Average is a cyclical indicator of the US economy and has recently fallen below its four-year GDP trend. This marks the first occurrence of such a decline since the crash prompted by the coronavirus in 2020. According to the GDPNow forecast from the Atlanta Fed for the first quarter of 2025, real growth is projected at -2.8%. Meanwhile, US consumer sentiment is deteriorating, with rising consumer inflation expectations (as indicated by the University of Michigan and the Conference Board’s consumer confidence indices). It remains to be seen how the tariffs may contribute to inflation while simultaneously hindering economic growth. As indicated in one of my “Stefan’s Weekly” from February, the risk of entering a stagflationary phase is increasing. After all this, I would not be surprised to see the Federal Reserve still lower the key interest rate this quarter.

Tax on Imports

Ladies and Gentlemen, importers, particularly American importers (companies, farmers, restaurants, hotels, etc.), bear the cost of those tariffs, which are nothing but taxes levied on imported goods. Therefore, while the Trump administration positions itself as a proponent of low taxes, tariffs directly increase the tax burden on goods that the average consumer purchases. Foreign export companies also face indirect costs due to these tariffs. The increased prices of their products in the U.S. market make them less competitive. To mitigate this disadvantage and maintain competitiveness, many foreign exporters may lower their prices, resulting in reduced profit margins. We must not fool ourselves; ultimately, the American consumers pay the price. Neither the foreign exporter nor the domestic importer can fully absorb the impact of a 20, 30, or whatever percent tariff by lowering their profit margins. Consequently, the burden of the tariff is passed on to consumers.

Rocky Balboa and the Swiss Government

The Swiss government has declared that it will not implement any immediate countermeasures in response to the tariffs imposed by the United States. This decision is judicious, considering the broader implications for international trade relations.

Last but not least, I think the quote presented today resonates strongly with the theme of this week’s “Stefan’s Weekly.”

Ladies and Gentlemen

Feel free to send your messages to smk@incrementum.li.

Many thanks, indeed!

I wish you an excellent start to the day and weekend!

Yours truly,

Stefan M. Kremeth
CEO & Head of Wealth Management
Incrementum AG – we love managing assets

Tel.: +423 237 26 60
Cell: +41 79 303 48 39
Im alten Riet 153
9494 Schaan/Liechtenstein
Mail: smk@incrementum.li