S&P 500: Climbing The Wall Of Worry

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I was talking to a very good friend, and I asked him how he was doing, and he said, "I have never had worse anxieties than I do now." I don’t know—I’ve known him to be a very level-headed guy. Successful, kids getting out of college, decent-sized bank account and holdings. But he went on to say, "It’s not as easy as it used to be."

In the past, when there were bad economic times, I always felt the U.S. would figure it out. But now it really does feel like the U.S. has fallen out of grace, which I believe has been in motion for a long time. If there’s going to be finger-pointing, I think it starts with the Fed interest rate path at the end of 2024. And absolutely, Trump’s tariff tantrum only exacerbated the problem and accelerated the stock, bond, dollar, and crypto sell-off. Of course, the public turned on Trump, but the list of problems goes way beyond the President.

I remember during the Credit Crisis, when the Fed was going nuts with QE, that people were saying the Fed would never pay the debt back.

2008 Credit Crisis:
The Federal Reserve’s total financial commitments during the 2008 financial crisis were approximately $12.75 trillion, including about $1 trillion in domestic emergency lending (e.g., TAF, PDCF), approximately $10 trillion in currency swap lines to foreign banks, and around $1.75 trillion in QE1 asset purchases (MBS, agency debt, Treasuries). After repayments and interest, the net cost was around $498 billion. During the 2008 crisis, QE1 expanded the Fed’s balance sheet from $890 billion in 2007 to $4.5 trillion by 2015, with total commitments peaking at approximately $12.75 trillion (gross, including lending).

During the 2020 COVID pandemic:
The Federal Reserve conducted approximately $4.4 trillion in quantitative easing during the 2020–2021 COVID-19 pandemic, with about $2.5 trillion in asset purchases in 2020 alone (March–December: ~$1.8 trillion Treasuries, ~$0.7 trillion agency MBS, ~$0.02 trillion other). Total purchases from March 2020 to December 2021 included roughly $3.0 trillion in Treasuries and $1.4 trillion in MBS, expanding the balance sheet from $4.2 trillion to $8.9 trillion. I think we passed the Rubicon during that period in terms of wasted money, and we’ve really never fully recovered.

The largest costs to the U.S. economy in 2025—interest on national debt, Social Security and Medicare, tariffs, healthcare, and military spending—reflect fiscal, demographic, and trade challenges. Despite the ES up 30% off their lows, the lingering problem remains the record U.S. debt, estimated to be $36.903 trillion, which does not include Trump’s new $3 trillion budget. It won’t be long before the deficit is over $40 trillion.

The interest payments are shocking. Below is what the U.S. would pay in interest if the national debt were $40 trillion:

• Daily Interest: About $3.7 billion each day

• Weekly Interest: Roughly $25.7 billion each week

• Monthly Interest: Around $111.8 billion each month

• Quarterly Interest: Approximately $335.4 billion every three months

• Six-Month Interest: About $670.8 billion every six months

• Annual Interest: Roughly $1.34 trillion each year

No matter how you look at it, the growing debt is UNSUSTAINABLE.

In the end, the markets are weathering the storm, but one has to wonder how long the disconnect can last. The answer? As long as the government keeps pumping.

Nvida (NVDA) Preview:
Options trading shows investors are bracing for a big swing in Nvidia stock after the earnings, as has often happened in recent quarters. Nvidia shares have risen nearly 25% in the past month, putting the stock up about 1% since the start of the year. Technical analysis suggests bullish momentum is on Nvidia's side heading into today's report. Nvidia stock is expected to move about 6% in either direction by the end of the week, according to an analysis of options pricing data. That would put Nvidia’s share price at either $143.92, a 4-month high, or $127.09. Analysts expect Nvidia to report revenue and earnings growth of about 66% and 40%, respectively, in the most recent quarter.

Goldman Sachs is forecasting Nvidia's revenue for fiscal Q2 to be $28 billion, plus or minus 2%. They also expect gross margins to be 74.8% (GAAP) and 75.5% (non-GAAP), plus or minus 50 basis points. Yahoo Finance also noted that Goldman Sachs analysts raised their price target for Nvidia to $800, indicating a 21% upside from current levels.