Summary: US stocks and crude oil prices have lifted on the pause in the tariff war with the US and China lowering tariffs against each other to reasonable levels and starting negotiations for long term fixes. WTI has lifted from US$56/b to US$64/b as fear of global recession seceded. Tariffs have been lowered to 30% from China and 10% against US products to give negotiators a chance to get a meaningful deal. A concession by China as this process unfolds was to order new Boeing planes and allow previous orders to now be accepted. One tough nut still is that China continues to embargo critical minerals sales to the US, and the US has frozen access to China of the latest NVIDIA AI chips. Less powerful chips are now allowed. I am skeptical that real quality deals will be done over the coming months and that the stock market will face further shocks and Trump chaos. Stocks have 10-15% downside with the tech area being the most vulnerable.  WTI should breach US$60/b and retest the April lows in the mid-US$50’s. Another great buy window as we saw in early April should be seen in the coming weeks. Get ready to add to favourite energy ideas. 

The US trade tariffs were supposed to raise hundreds of billions to offset the US$2T budget deficit (deficit US$260B in April 2025 – US$100B higher than March and US$50B higher than April 2024) and were broadcast as being able to fund the massive permanent tax cut Trump wanted. The additions of no tax on tips, medicare and social security sounded nice but the reality is the tax deal numbers don’t work. The current deficit data is higher than last year and the DOGE cutbacks and firings have been halted by Blue State Judges. Trump’s first 100 days are over and he did succeed in gaining control of the border (an important win) but the courts are holding him back from sending millions of illegals away from the US.

The next 100 days will be tougher: He needs success on these issues before the end of this timeline:

• Get an extension of the debt ceiling and raise it by US$4T.
• Get his tax cuts permanently approved.
• Show that he can cut wasteful government spending.
• Get Congressional approval to close down government departments, regulations and staffing.
• Get peace deals signed between Russia and Ukraine, get Iran to end its nuclear weapons program or the US will attack and destroy their nuclear facilities, end Houthi attacks on Red Sea commercial and military shipping and reopen the waterway permanently. A recent new one on his desk, Pakistan and India, both nuclear powers that have fought wars before and are both nuclear armed. So far Pakistan is the winner as its Chinese jets have shot down five Indian fighters with no losses of their own.

I remain concerned that a Geopolitical Challenge will take place and be the ‘Black Swan’ to take the general stock markets to our downside targets. The list of areas of concern has expanded as noted above. 

Our expected downside targets are:

• Dow Jones Industrials Index 35,000 (now 42,049)
• S&P 500  4,800 now (now 5,890)
• NASDAQ 13,000 (now 19,132)
• S&P/TSX Energy Index <225 (now 263)
• WTI  <US$56-58/b (now US$63.07/b)

As this decline progresses in the coming weeks we should see more capitulation from leveraged investors who get nasty margin calls. Intermarket pressure should take energy stocks down as well as the overvalued tech sector (AI and semiconductor stocks the most overvalued still) and provide energy investors with the next low risk BUY window. This should trigger a Table Pounding BUY signal during the coming weeks into June and we will send out to SER subscribers another Action Alert with new BUY ideas when that signal is triggered. 

The Trump tariffs have still not been seen by customers as inventories of current stock need to be sold and then new imported items will carry the tariffs and become relatively expensive. This is now expected to hit stores this summer. Stores such as auto dealerships are seeing good traffic now as buyers complete transactions at current prices before the tariff rise. Inflation now seen at 2.8% could rise to over 4% by the fall. Some economists see prices impacting households by US$2,800 by year end. 

We have not yet seen in the current market decline a lot of disgorgement of assets. Investors, especially retail investors have been buying the dips. Historically at market bottoms they are in fear mode and selling. Panic climactic action is always seen at market bottoms and we expect this to occur in the coming weeks. Use this market mayhem to add to your favourite energy positions. If we are right that by year end Iran will lose production of >1.5 Mb/d and Venezuela > 500 Kb/d then there will be a significant shortage of crude production and prices will lift over US$80/b. Remember global inventories are low historically so even a 1 Mb/d shortfall can drive prices up materially. 

For the energy sector we have bargain levels right now. We have already gotten all three of our BUY indicators saying BUY. The third one and the most reliable historically is the S&P Energy Bullish Percent Index. When this reaches over 90% it is  time to take profits and when under 10% a BUY signal. In March 2020 it fell to a Table pounding BUY level of 3.7%. In early April 2025 it plunged to 0% and stayed at that level for three days. The only other reading this low was in 2008 at the worst levels for the market averages and stocks during the financial crisis. It has recovered and we see it again falling below 10% as it tests the lows. Use upcoming weakness to BUY your favourite energy investments and consider moving to a full weighting; whatever that is for your personal portfolio needs. Check with your investment manager/advisor to make appropriate individual company decisions. 

For long term investors, find the ideas you want to own for this energy (and most commodities) super cycle and put your BUY orders below the market on plunging days to get great bargains for significant appreciation into the end of this decade.

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