Tariffs are back in the news … how tariffs could make the dollar even stronger … more signs we’re near a top? … another big win for Eric Fry’s subscribers Tariffs are back. Last Friday brought word of soon-to-be-announced “reciprocal” tariffs from President Trump, and yesterday, we learned that Trump is planning 25% tariffs on steel and aluminum. Beginning with last Friday’s news, here’s Bloomberg: President Donald Trump said he plans to unveil reciprocal tariffs [this] week in a major escalation of his trade war with US economic partners… Trump promised during the presidential election campaign to advance legislation empowering him to hit any country that charges a duty on a US-made good with “the same exact tariff.” This policy has European goods directly in the crosshairs. What’s particularly ruffling Trump’s feathers is the European Union’s “value-added tax.” This is a standard minimum 15% tax (though it can go much higher) that hits virtually all imports from non-EU countries, including the U.S. Here’s Trump from about a week ago, speaking about Europe: They don't take our cars, they don't take our farm products, they take almost nothing and we take everything from them. Millions of cars, tremendous amounts of food and farm products. Meanwhile, yesterday Trump announced 25% tariffs on imports of steel and aluminum. The proposed levies are on top of existing tariffs. As I write, the Administration has released no specifics on when they will occur. Reciprocal tariffs and levies on steel/aluminum risks a resurgence of inflation. But let’s not overlook the potential effect on the dollar and corporate earnings. How tariffs might impact the greenback, and what it could mean for stocks Let’s zero in on potential tariffs applied to EU goods. The proposed tariffs could reduce U.S. imports from the EU, which would likely have a strengthening effect on the dollar. As you can see below, the dollar is already not far below its 20-year highwater mark. 
To make sure we’re all on the same page, when Americans buy EU goods, they must convert dollars into euros to complete the transaction. This increases demand for the euro while reducing demand for the dollar. Higher prices on EU imports due to tariffs likely means some Americans stop purchasing those goods. Fewer transactions results in fewer dollars being exchanged for euros. Less demand for euros and more demand for dollars (because those dollars remain in circulation here instead of going to Europe) means a stronger relative dollar. Also, let’s not forget that a trade war rattles many investors. And heightened market uncertainty usually drives investors toward safe-haven assets like the dollar, further bolstering its value. | Recommended Link | | | | Consider yourself warned: February 26 could spark a nasty market move. Our breakthrough new calendar strategy pinpoints which dates of the year could see the BIGGEST stock jumps and declines – for 5,000 stocks – with 83% backtested accuracy. It’s how you could have booked a 1,526% gain in 35 days on (ES)… A 756% gain in 18 days on (ALNT)… A 692% gain in 16 days on (EMR) and more in our backtest. Claim 1 free year of access through this offer. |  | | So, what does a stronger dollar mean for stocks? International companies that generate significant revenues overseas encounter headwinds due to the value-eroding impact of currency conversion. This hurts earnings, which weighs on stock prices. But for domestic stocks, a stronger dollar can be a tailwind. Legendary investor Louis Navellier made this point last week in his service, Breakthrough Stocks (subscribers can log in here): The other thing is the dollar remains amazingly strong, and a strong dollar shoves money toward more domestic stocks, more small-cap stocks. Recently, Louis has been searching for which small-cap stocks are on the verge of an earnings explosion thanks to AI. As you’re aware, the arrival of the low-cost Chinese AI model, DeepSeek, will likely have an enormous influence on money flows – namely, far greater profits hitting the bottom lines of select smaller companies now able to implement AI cost-effectively. Due to the smaller sizes of these companies, a wave of new AI-related profits can have a massive impact on their respective stock prices, in contrast to what you’d see from a mega-cap stock. In fact, Louis believes there’s 10X potential on the table. We’ll have more on Louis’ research later this week. Stay tuned. Switching gears, here’s another reason to make sure you have a plan for when the market turns To be clear, I have no idea when today’s bull market will run out of steam. We could be years away. But a study of the most successful (and wealthiest) investors in the world shows an obsession with “defense” rather “offense.” Here’s author and trader Jack Schwager: Amateurs think about how much money they can make. Professionals think about how much money they could lose. In recent months, I’ve made the case for why caution is paramount in today’s market. I’ve referenced countless nosebleed valuation indicators, greedy sentiment indicators, and various red-flag contrarian indicators, among other things. Well, here are two additional pieces of data to factor into your market positioning today. As you’re about to see, in 2023 and last year, fewer than 30% of the companies in the S&P outperformed their index. This happened because the massive Mag 7 companies with their outsized weighting allocations erupted, leaving the average company in the dust. And frankly, “erupted” might be underselling what happened. As you can see below, the Mag 7 stocks are now valued 30 times higher than they were just 10 years ago. 
Yes, this is an enormous run-up. But here’s The Kobeissi Letter with some additional context to bring home just how enormous: The Nasdaq 100 rose 12x in 10 years before the 2000 Dot-Com Bubble popped. The Nikkei 225 rose 10x in a decade during the Japanese bubble of the 1980s. Furthermore, Gold saw a 15x increase in price in the 1970s before its peak. Lastly, Nifty Fifty stock prices rose 5x in the 1960s before the bull market ended in 1969. Will profits generated from AI roar higher to support this 30X price explosion? Or will Mag 7 prices have to come back to earth to reattach to earnings that can’t live up to the hype? As you mull that, let’s return to the factoid that led off this discussion: in 2023 and 2024, less than 30% of the companies in the S&P outperformed their index. But that’s not the real story. As you can see in the chart below, the last time this imbalance occurred was in 1998 and 1999. 
Source: Richard Bernstein Advisors, LLC / BofAML US Strategy No, this doesn’t mean bail on the stock market today. But, yes, make sure you know how you’ll protect your portfolio if “2000 2.0” is lurking around the corner. We’ll wrap up this section with Warren Buffett’s take: Investing is all about protecting your downside. The upside will take care of itself. | Recommended Link | | | | While AI is all the rage… I believe a new, cutting-edge technology will steal the headlines in 2025. And if you’re in before the crowd, it could mean a big winner for you. I’ve found one stock I think will benefit the most. It could be the #1 Tech Stock of 2025. |  | | Before we sign off, a big “congratulations” to Eric Fry’s Leverage subscribers For newer Digest readers, Eric is a “macro” investing expert and the analyst behind Leverage. In this trading service, Eric’s preferred investment vehicle is a LEAPS trade, which stands for “Long-Term Equity Anticipation Security.” You can think of this as an option with a longer-dated expiration, usually lasting from one to three years. Eric prefers LEAPS for a variety of reasons, including: - The “price of admission” to a particular trade is lower. For example, buying call options on 1,000 shares of a stock costs much less than buying 1,000 shares of that stock outright
- You benefit from leverage (hence, the name of Eric’s service). As he writes, you “put down a small investment to control a large amount of stock”
- You have much smaller downside risk, compared to a stock. For example, the buyer of a call option can’t lose more than the cost of the option, no matter how far the underlying stock might fall.
Last Friday brought a good illustration of all the reasons why Eric prefers LEAPS when he recommended his Leverage subscribers take 160% profits on a portion of their Dutch Bros Inc. (BROS) trade. From Eric: I expect these options to continue climbing, as Dutch Bros shares continue to delight investors. Since the options do not expire for nearly a year, plenty of time remains for them to add to their sizeable gains. Nevertheless, I recommend taking some chips off the table by selling half of your position. By doing so, you would recoup all of your initial investment, and guarantee a return of at least 80% on the trade, even if the remaining half-position went to zero. Eric’s subscribers opened this trade on July 1 – barely seven months old. Making 160% in just over half a year isn’t all that easy. So, a well-deserved congrats to all you Leverage subscribers. To learn more about LEAPS and Eric’s strategy in Leverage, click here. We’ll keep you updated on all these stories here in the Digest. Have a good evening, Jeff Remsburg | 
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