RIP 401K: Trading through the Trump tariff turmoil

Note: I'm going to keep this week's newsletter brief because I have to stop by the hardware store to buy some rope and a ladder.

When the prediction market you work for starts messaging you at 8:00 PM on a Wednesday telling you to highlight the recession market on the homepage ASAP, is that a good sign, or a bad sign?

I mean, it could go either way, right? Perhaps they are in a hurry to update because the odds of a recession are dropping so quickly?

Well, last Wednesday, that wasn't the case.

As you might have noticed, since Wednesday's "Liberation Day" speech by President Trump, in which he unveiled the highest tariff rates since the 1800s, things have been a little...frothy.

Is this just a market overreaction, or is the economy really headed off a cliff?

Kalshi traders are forecasting the latter (which is why I'm buying the ladder).Here's a closer look...

(CLICK HERE TO TRADE OUR TARIFF AND ECON MARKETS.)

This is an opinion, not financial advice. The views expressed are those of the author, who uses a pseudonym and cannot trade on the platform.

Since the speech, odds of a recession in 2025 have jumped to 60%. These odds were at 17% just before Trump took office.

And traders are now projecting that Q1 GDP growth will come in negative, a drop of more than 3% since February 7th.

And traders now forecast GDP growth for 2025 to come in at 0.80%, down from a projected 2.5% just before Inauguration Day.

Another bad sign is that the Fed is now projected to make four interest rate cuts in 2025. That's up from between one and two cuts in early February.

A few months ago, a rate cut may have been interpreted as a good thing, since the risk of a recession seemed low, and inflation was moving in the right direction.

But as you'll see below, things have changed.

Earlier this month, inflation in 2025 was expected to increase by less than 3%. But since Trump's speech, that forecast has jumped to 3.5%.

Remember, the reason the Fed raised interest rates to begin with was to bring inflation in line with its 2% target. So if Powell is willing to cut rates four times despite the fact that inflation is heading in the wrong direction, they must be worried.

Obviously, none of this is set in stone. There's a 60% chance of a recession, but that means there's still a 40% chance it won't happen. However, the fact that all of these markets are moving in the wrong direction is certainly a red flag.

Right now, with everything in the wrong direction, there are lots of people out there, many with blue hair and "in this house, we believe" yard signs who are screaming "I told you so."

Well, so what?

To be clear, if you put your money where your mouth is, congrats!

For example, if you really believed that things were going to go south, dollars were on sale for $0.20 in our Recession market on Inauguration Day. If you'd hedged then, you'd already have tripled your money.

Did you? Or are you just getting run over by the tariff train like everyone else?

My point being, it's easy to sit around and say everything is going to fall apart (I do that weekly with this newsletter), because eventually, things fall apart. But that doesn't mean you're "right," it just means you're a pessimist who waited out the clock.

This site is literally designed for you to hedge against economic and political uncertainty. Why not take a break from watching White Lotus and take advantage of it?

On the other hand, there's also a whole horde of red-hatted MAGAs claiming Wall Street is just the latest victim of Trump Derangement Syndrome. To them, the stock market sell-off is an overreaction, and it's only a matter of time before things correct.Soon, thanks to these tariffs, the underwear plants and typewriter factories will come flooding back to the heartland, ushering in a new golden age of manufacturing in the US.

Well, if you really believe Trump is on the right track and things are going to eventually blow over, now is your chance.

If you start trading the other side of these bearish econ markets now, who knows? Maybe you can make enough money to open your own underwear factory instead of just working at one.

Either way, good luck out there!

Follow Terry Oldreal on X: @realOldTerryFollow Kalshi on X: @Kalshi

The opinions and perspectives presented in this article belong solely to the author, who is using a pseudonym and cannot trade on Kalshi. This is not financial advice. Trading on Kalshi involves risk and may not be appropriate for all. Members risk losing their cost to enter any transaction, including fees. You should carefully consider whether trading on Kalshi is appropriate for you in light of your investment experience and financial resources. Any trading decisions you make are solely your responsibility and at your own risk. Information is provided for convenience only on an "AS IS" basis. Past performance is not necessarily indicative of future results. Kalshi is subject to U.S. regulatory oversight by the CFTC.