| Swan Dive — May 5, 2025 Nine Days of Sunshine Addison Wiggin As of Friday, the S&P 500 had risen for nine straight sessions — its longest winning streak since 2004 — recovering all of its Liberation Day losses and posting an 18% gain from the April low.
Traders hope the U.S. and China will stop lobbing economic grenades and start negotiating. Last week's better-than-expected earnings from a handful of mega-cap companies helped buoy confidence.  Meanwhile, retail investors have poured over $40 billion into equities over the past 19 weeks — the most aggressive buying spree to kick off any year since 2008.
That’s a bullish signal on the surface. Unless you’ve got you’re registering brain waves.. But as any veteran of the markets knows, when the herd starts running this hard in one direction, it’s time to ask: what’s around the corner that they’re not seeing?
There’s a lot of mixed economic data to wade through this morning. It’s just as you might expect for an economy in transi 📉 The Recession Started Before the Trade War Last week, the Commerce Department confirmed the U.S. economy shrank 0.3% in Q1 — the first contraction since 2022. That was before tariffs began to bite. The sharp surge in imports — largely businesses racing to get ahead of new trade costs — shaved off a chunk of GDP.  Business investment rose, but much of it likely went into front-loaded inventory for tariff season.
The bigger concern is consumption, which slowed to its weakest pace since mid-2023. Will consumers be confident enough to buy (borrow) their way through a slowing economy?
Without follow-through demand, those shelves may ironically sit full, the opposite of widespread shrieking by the media that shelves will be empty by June.
Bottom line: even without the trade war, the economy was softening. Investors looking for signs of health should be watching whether those inventories convert into actual sales. If not, the slowdown could deepen as the transition grinds on.
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🏭 Real Economy Still in Reverse In Trump’s transition to a more productive, trade-balanced economy, this is the pain before the gain. For serious, income-oriented investors: now is the time to be selective in what you buy amid the market chaos.
April’s ISM Manufacturing PMI came in at 48.7, confirming two months of contraction. New orders dropped to 47.2. Production? Down hard — 44.0, the weakest since the spring of 2020. While Wall Street celebrates a tech-led rally, the nation’s factories are scaling back.
For the time being, orders are shrinking, pricing power is slipping, and producers are reluctant to invest until there’s more clarity on trade and rates.
If all things were equal, this data would reveal an alarming trend. However, with the Trump transition, all things are not equal. A couple of shiny trade deals, inked and announced, could move sentiment dramatically. 📜Trade Agreements and Frameworks Treasury Secretary Scott Bessent says new trade “agreements” will likely be frameworks, not full treaties — headlines, not handshakes. That may help calm the markets, but it won’t restore business confidence.
Without durable deals, capital will stay cautious. That puts the Fed in a tight spot: trying to manage inflation expectations while real growth is on ice.
If you’re adjusting your portfolio based on Fed pivots, tread carefully. Real clarity will come from actual policy, not podium talk or media speculation. Until then, continue to expect uncertainty. 🛍️ Consumers Are Tapped — and Skipping Summer Nearly 68% of the U.S. economy runs on household spending. So when Americans tighten their belts, it's not a detail — it’s a headline.
The latest consumer sentiment data shows a meaningful pullback: confidence just posted its sharpest monthly drop since 2021, and expectations about the future are hovering near a 14-year low.  More striking? The number of Americans planning vacations dropped to the lowest level since the pandemic’s peak.
Investors managing their retirement plans should pay close attention to consumer behavior. Weak spending today means slower earnings growth tomorrow, lower tax revenues, and a rising likelihood of policy intervention – amid the trade war.
But for now, the consumer is stepping back — and the market hasn’t priced that in, just yet. 🏦 Will the Fed Cut This Week? Not Likely. But Watch September. The Federal Reserve meets Wednesday, and no one’s expecting fireworks. The Wall Street consensus is no change.
JPMorgan still forecasts a September cut, when tariff-induced inflation may ease and job losses pick up. But even that’s speculative. As Morgan Stanley’s chief economist put it, this is a scenario-driven moment.
We’re in uncharted territory — a high-debt, high-volatility, post-stimulus economy undergoing a structural shift. The Fed will move when the data leaves no other choice.
Oddly, the uncertainty from unannounced trade deals and slowing GDP numbers could give Jerome Powell and crew at the Fed the juice they need to give in to political pressure and cut rates on Wednesday. But the market isn’t betting on it being a sure thing yet.
For investors, this means staying cautious with long-duration assets and watching the bond market closely. Interest rate cycles don’t turn on a dime. 🧓 Buffett Steps Back — But Stays on Guard In the announcement heard ‘round the web, instantly, Warren Buffett stunned shareholders this weekend by announcing his plan to retire at year-end, passing control to Greg Abel.
But the bigger reveal? Berkshire Hathaway now holds $347.7 billion in cash — nearly 30% of its assets — including $305.5 billion in short-term Treasurys.  As we’ve been speculating, that’s a signal, not a coincidence. When the most disciplined investor in modern history hoards cash, it’s not because he missed the rally. It’s because he doesn’t trust it.
For investors: this is your model. Stay patient, stay liquid, and wait for your pitch.
For the moment, the market is near all-time highs. But GDP is falling, manufacturing is contracting, and the consumer is rattled. We are in the early stages of a historic shift — from an economy built on debt and cheap consumption to one rooted in production, trade, and sound money.
That won’t be a smooth ride. It will be uneven, uncertain, and uncomfortable. If the media’s any read, most people don’t understand it. And a few mischievous knuckleheads are trying to use that to their political advantage ahead of the 2026 midterms.
If managed wisely, the Trump transition could be the healthiest reset in decades. For retirees managing their capital, watch for actual policy, not today’s speculation and headlines.
Stay diversified, hold cash, and focus on quality. In an era of political noise and economic recalibration, clarity — and capital — will belong to the patient.
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When great shifts happen in the economy and the markets, the return “of” capital is equally, if not more, important that return “on” capital.
– Addison P.S. If you missed last week’s Grey Swan Live, where Mark Jeftovic and I explored how bitcoin, gold, and real assets fit into this new post-fiat reality, you can catch the replay here.
As always, your cheerful reader feedback is welcome: feedback@greyswanfraternity.com (We read all emails. Thanks in advance for your contribution.)
How did we get here? Find out in these riveting reads: Demise of the Dollar, Financial Reckoning Day, and Empire of Debt — all three books are now available in their third post-pandemic editions. You might enjoy one or all three. 
(Or… simply pre-order Empire of Debt: We Came, We Saw, We Borrowed, now available at Amazon and Barnes & Noble or if you prefer one of these sites: Bookshop.org, Books-A-Million or Target.)
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