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Authored by Ron Paul via the Ron Paul Institute for Peace and Prosperity,

News this week that Elon Musk will soon be departing his “Department of Government Efficiency” (DOGE) is a grim reminder of what happens when you challenge big spending DC. Unfortunately, the lesson once again is that when you challenge the empire, the empire eventually strikes back.

President Trump rode into office with the help of Elon Musk’s ambitious plan to cut two trillion dollars in spending and slash useless and bloated government bureaucracies. 

Opinion polls demonstrated the huge popularity of the “Department.” 

Americans were excited when DOGE came to DC.

The exposure of the real harm being done to the country by agencies like USAID and others reinforced the idea that much of the “Federal bureaucracy” was simply not needed. Although Musk became a figure of hate for the entrenched special interests, to the large chunk of America forced to pay for Washington’s excesses he became a hero.

Many in Congress, seeing its popularity, actively embraced DOGE. Suddenly those who helped us rack up 37 trillion in debt were talking about making huge cuts and posing for photos with Musk.

Unfortunately, after the photos were taken and the hoopla had died down, Congress returned to doing what it usually does: nothing. There is no way for a DOGE to succeed without the Legislative Branch enshrining those cuts in legislation. But when the massive “Big Beautiful” spending bill was introduced, the spending cuts were nowhere to be found.

In the end it was the Beltway addiction to the global US military empire that may have hammered the final nail in DOGE’s coffin. The “Big Beautiful” spending bill actually increased military spending even after President Trump hinted that a 50 percent cut was possible.

Defense Secretary Pete Hegseth bragged about presiding over the “first” trillion-dollar defense budget. Starting a war on Yemen – at over a billion dollars a month – and saber rattling over Iran are the most obvious evidence that the empire has struck back. And of course the DC hawks want to “confront” China.

This isn’t the first time a populist, popular movement to tame the Beltway beast was embraced then defeated by that same beast. The “Tea Party” movement was launched in December, 2007, with volunteers supporting my 2008 Presidential campaign holding a record-breaking 24 hour “money bomb” on the anniversary of the 1773 Boston Tea Party.

Americans sick of deficit spending, over-reaching government, and the costly and counterproductive US military empire overseas, joined together to demand change. The “money bomb” success got Washington’s attention – money is the lifeblood of the political class – and before too long politicians of all stripes declared themselves to be part of the “Tea Party.”

They loved the popularity of associating themselves with the “Tea Party.” But actually cutting government? Not so much.

The first thing these newly-minted “Tea Party” members rejected was our demand for an end to the unsustainable, bloated military budget and our aggressive foreign policy. Eventually they backed away from other spending restrictions and within a few years the “brand” was diluted and tossed away.

What is the lesson here? Is it all futile? Hardly. The popularity of DOGE shows that Americans still want a much smaller government. That is great news, and the country owes a debt of gratitude to Elon for reminding us of this. But until Americans elect Representatives who have the courage to follow through beyond photo-ops, we will sadly continue down the path toward bankruptcy and collapse.

President Trump has responded to comments by Mexican President Claudia Sheinbaum, who said that she rejected an offer by President Trump to let the US Army hunt cartels on Mexican soil.

On Saturday, Sheinbaum told supporters in Eastern Mexico about Trump's offer;

"In one of the calls, the U.S. President Donald Trump said it was important for the U.S. Army to enter Mexico to help us in the fight against drug trafficking. And I want to say that’s true. In some of the calls, he said, quote, 'How can we help you fight drug trafficking? I propose that the U.S. Army come in to help you.' And you know what I told him? 'No, President Trump, the territory is sacrosanct. Sovereignty is sacrosanct. Sovereignty is not for sale. Sovereignty is loved and defended.'" she said, one day after Trump claimed "She is so afraid of the cartels she can’t even think straight."

On Sunday, Trump told reporters aboard Air Force One that he made the offer because the drug cartels were "horrible people" who caused thousands of deaths.

"If Mexico wanted help with the cartels, I would be honored to go in and do it," he said.

When asked if he was disappointed that Sheinbaum turned down his offer, Trump replied, "I think she's a lovely woman. The president of Mexico is a lovely woman, but she is so afraid of the cartels that she can't even think straight."

“La presidenta de México es una mujer encantadora, pero tiene tanto miedo de los Cárteles de la Droga que no puede pensar bien”

Trump sobre Sheinbaum pic.twitter.com/VUnoUddvls

Trump's proposal was first reported last week by the Wall Street Journal, which detailed tensions between Trump and Sheinbaum towards the end of a 45-minute  telephone conversation on April 16.

While both countries have cooperated on certain security issues, including allowing U.S. drone flights to identify fentanyl labs, Sheinbaum has consistently rejected any form of military intervention from the United States in Mexican soil. "We don't accept invasions or interference," she said last month. "We are not a protectorate or colony of any foreign country."

However, some in the Trump administration are reportedly considering launching drone strikes on drug cartels in Mexico anyway, the Crisis Group detailed last week. If the decision is ultimately carried out , it would be the first time since 1914 that the U.S. conducts unilateral military action in Mexico. "Some officials in Washington appear to be laying the groundwork for military action against drug trafficking organizations in Mexican territory, with – or without – Mexico's consent," the Crisis Group said in a passage of its analysis from last week. -Latin Times

"We can work together, but you in your territory and us in ours," said Sheinbaum.

As the Epoch Times notes further, in a Jan. 31 interview with Fox News, U.S. Defense Secretary Pete Hegseth left open the possibility of U.S. military action in Mexico.

Responding to Hegseth’s comments just days later, Sheinbaum insisted that her country’s sovereignty be respected.

In early February, Sheinbaum agreed to mobilize 10,000 Mexican troops to assist in an expanded effort to counter cross-border trafficking. Trump agreed to delay a planned 25 percent tariff on Mexico as a show of goodwill following Sheinbaum’s troop deployment decision.

By mid-February, the U.S. State Department designated six Mexican cartels as foreign terrorist organizations, along with the El Salvador-based MS-13 and the Venezuela-based Tren de Aragua.

The terror designations provide more avenues for the U.S. government to target the finances of these transnational criminal organizations. They also raise the possibility of military action.

Following the terror designations, Sheinbaum reiterated her opposition to any U.S. intrusion into Mexico’s territory.

Mexican authorities arrested Humberto Rivera, a suspected top regional leader of the Sinaloa cartel, in February, in coordination with the United States.

The Mexican government also welcomed U.S. Army Green Berets to their country in February as part of a joint training exercise with the Mexican Marine Corps.

Authored by Jonathan Turley,

The 46th News & Documentary Emmy Awards nominations are out, and it seems that everyone is talking about just one of them. The “Outstanding Edited Interview” category is hardly a common draw for public or even industry attention. However, one of this year’s nominees is CBS for its primetime special featuring then-Vice President Kamala Harris and her running mate, Minnesota Gov. Tim Walz. The interview is the basis for a $20 billion lawsuit by President Donald Trump against CBS News and its parent company, Paramount Global, alleging election interference due to the biased editing out of an embarrassing answer by Harris.

The nomination seems clearly designed to push back at Trump and rally around CBS. 

(For the record, I opposed this lawsuit on both legal and policy grounds.) 

However, it sends precisely the wrong message for the media at this time.

Many have criticized CBS for its editing of the interview with journalist Bill Whitaker after the network shortened portions of Harris’s answer to a question about the war in Gaza in its initial broadcast. It later provided a full transcript of her remarks online. (For full disclosure, I worked twice under contract with CBS as a legal analyst.)

While I have great reservations about the legal action, I agree with Trump that the interview showed bias and an effort to protect Harris. CBS has been repeatedly accused of such bias, including criticism of the performance of Norah O’Donnell and Margaret Brennan as moderators in the presidential debate. That included reneging on a pledge not to “fact check” and showing manifest bias in their treatment of the candidates.

In the interview, Harris had one of her signature verbal pileups, an incomprehensible effort to explain the U.S. position in the Middle East. The word salad was played on the Sunday show but the primetime interview on 60 Minutes featured only the second half of the answer.

The “Face the Nation” clip showed Harris saying that

“The work that we have done has resulted in a number of movements in that region by Israel that were very much prompted by, or a result of, many things, including our advocacy for what needs to happen in the region.”

The “60 Minutes” clip showed Harris saying more concisely that “we are not going to stop pursuing what is necessary for the United States, to be clear about where we stand on the need for this war to end.”

This interview, shortly before the election, was considered one of the most important of the campaign. Harris avoided spontaneous exchanges or interactions with the media and only agreed to a few interviews with favorable outlets. One of the issues in the campaign was Harris’s embarrassing answers, particularly while representing the United States abroad. These include:

“I am here. Standing. Here. on the northern flank, on the eastern flank, talking about what we have in terms of the eastern flank and our NATO allies, and what is at stake at this very moment.”

“Ukraine is a country in Europe. It exists next to another country called Russia. Russia is a bigger country. Russia decided to invade a smaller country called Ukraine, So basically that’s wrong.”

The word salad moments were common and Harris was kept on a tightly scripted agenda where the press was kept at a distance. Thus, the CBS interview was viewed as one of the few opportunities to see how Harris would do in an actual prolonged interview.

In other words, it was news that Harris struggled again when asked to speak for any length of time with a reporter.

60 Minutes decided that viewers did not have to see that part of the answer in primetime, even as part of an answer in which Harris claims that they want to be “clear” on where they stand on the issue.

CBS was wrong in the editing. Moreover, the suggestion that it should be given an award for such biased editing says much about the state of American journalism. No doubt many in the media approved of the network cleaning up Harris, yet again, for public reviewing.

None of this changes my view of the underlying litigation. Paramount Global’s controlling shareholder, Shari Redstone, is believed to want to close the lawsuit to clear the way for a multibillion-dollar merger with Skydance Media. It also wants to avoid continuing tensions with the Federal Communications Commission (FCC), which can delay or halt the purchase.

However, this lawsuit would ultimately fail. The media is allowed to engage in such editing. Indeed, bias itself is not generally actionable. Moreover, there were moments when Whitaker did press Harris, in sharp contrast to most of her interviews on shows like The View, Howard Stern’s SiriusXM show, and Late Night with Stephen Colbert. 

I have been a vocal critic of the mainstream media for embracing what I call “advocacy journalism” in my book, The Indispensable Right. Many in this country view mainstream media as a de facto state media due to the bias shown against Trump and for Democratic talking points. Indeed, the mantra “Let’s Go Brandon!” was embraced by millions as a criticism of the media as much as it was a criticism of President Biden.

However, the threats of harassing lawsuits destroy any moral high ground for Trump. It is also entirely unnecessary. As I will address this week at the Library of Congress, the public is leaving mainstream media en masse in favor of new media. Revenue and readers/viewers are dropping for many media outlets. That includes CBS, which has continued to struggle with ratings while refusing to offer more balanced coverage, including a recent controversy over pushing the “baby hoax.”

CBS was wrong in the editing of the interview and the nomination of the network for the interview only magnifies that error. However, the Administration should leave this matter to the public and the market to sort out.

Authored by Helen Partz via CoinTelegraph.com,

OpenAI CEO Sam Altman’s digital identity project, World, formerly known as Worldcoin, faces challenges in Indonesia after local regulators temporarily suspended its registration certificates.

The Indonesian Ministry of Communications and Digital (Komdigi) has halted the Electronic System Operator Certificate Registration (TDPSE) for World and World ID over suspicious activity and alleged registration violations, the ministry announced on May 4.

After the suspension, Komdigi plans to summon World’s local subsidiaries, PT Terang Bulan Abadi and PT Sandina Abadi Nusantara, to provide clarification on the alleged violations, it stated.

According to a preliminary investigation, World’s PT Terang Bulan Abadi was allegedly operating without TDPSE, while PT Sandina Abadi Nusantara — the subsidiary World was using for providing its services — is allegedly involved in legal misrepresentation.

Indonesian law requires registration by all digital service providers

In the statement, Komdigi emphasized that all digital service providers in Indonesia must receive electronic registration in accordance with local laws.

Additionally, using another entity’s registration is considered a major breach of Indonesian digital operations law, the authority noted.

“Worldcoin services are recorded using TDPSE in the name of another legal entity, namely PT Sandina Abadi Nusantara,” Alexander Sabar, the Komdigi’s director general for digital supervision, said in the announcement, adding:

“Noncompliance with registration obligations and the use of the identity of another legal entity to carry out digital services is a serious violation.”

Community action required

According to Sabar, World’s temporary suspension in Indonesia is a measure taken to prevent potential risks to the community.

He mentioned that the digital ministry is committed to overseeing the digital ecosystem fairly and strictly to ensure the security of the national digital space.

Alexander Sabar is the head of Indonesia’s newly established Digital Space Monitoring Directorate General. Source: Komdigi

Sabar said proper supervision would require active participation from the community. “We invite the public to help maintain a safe and trusted digital space for all citizens,” he said. “Komdigi also appeals to the public to remain vigilant against unauthorized digital services, and to immediately report suspected violations through the official public complaint channel.”

The community response has been divided over the action by Komdigi.

“Good job Indonesia — at least somebody is standing up to that scam,” one Reddit user wrote.

Others fired back, hinting at potential benefits stemming from World’s offering in Indonesia for the general public.

“If giving up your iris biometrics means you can feed your loved ones for a few weeks, that might be a trade worth making. In the end, it all depends on what matters most to you,” another Redditor said.

World’s latest news from Indonesia follows World’s debut in the United States in May 2025, with the platform rolling out its digital identity tech in six cities initially.

A number of global regulators were pushing back on World’s operations since its launch in July 2023, with governments like Germany, Kenya and Brazil expressing concerns over potential risks to the security of biometric data passed by users.

Authored by Charles Hugh Smith via OfTwoMinds blog,

Interest rates are linked to inflation, but they're also linked to risk.

As a result of recency bias, where we assume the recent past is a permanent state of affairs, many believe near-zero interest rates are "normal." They aren't. As the chart of 10-year US Treasury yields--a proxy for interest rates throughout the economy--illustrates, rates in the 3% or lower were an anomaly that only occurred in the relatively brief period of 2011-2022.

For the five decades between 1960 and 2007, interest rates of 4% and higher were the norm. These included the glorious decades of stable growth and rising stocks / housing valuations--the 1960s, 1980s, 1990s and up to 2007, just before the financial crisis of 2008-09.

For 33 of those years, interest rates of 5.75% or higher were the norm, from 1967 to 2000. No one said that the economy would collapse if interest rates didn't drop to 3%, for it was understood that super-low interest rates would ignite inflation and incentivize destructive speculative excesses.

For the 25 years between 1970 and 1994, rates between 5.75% and 8% were normal. The 10-year Treasury yield is now around 4% to 4.2%--far lower than what was considered normal for 25 years.

It's long been noted that interest rate cycles tend to run for decades, not years. Interest rates rose for around 25 years, and then declined for 40 years from 1981 to 2020--a period that was longer than average, thanks to the dominance of central bank monetary policies, or perhaps more accurately, the growing dependence of economies on extraordinarily low interest rates for their "growth."

If history is any guide, interest rates will rise back to the historic range between 5.75% and 8% and linger there for the better part of two decades. Alternatively, rates break above that range and skyrocket into the realm of debt / inflationary crises.

The return of Treasury yields to the historically "normal" range of 4% and higher has doubled the Federal interest payments on Federal debt. It was easily predictable that super-low interest rates would encourage an orgy of borrowing and spending of all that "nearly free money," which is precisely what happened.

The interest paid by households has also soared for the same reason: not just because interest rates rose, but because the borrowed money (debt) being serviced exploded higher due to low interest rates.

Higher debt / interest payments squeeze out other spending. Debt payments come first, or the entity defaults on its debts and enters bankruptcy--a bankruptcy that tends to bankrupt the lenders who will be lucky to collect pennies on every dollar they lent out.

Households are going to have a hard time servicing debt and spending more as rates rise, for wage earners' share of the economy has been in a freefall for 50 years. Less income + higher debt service payments = lower discretionary income to spend + inability to borrow more money to spend = recession.

Interest rates are linked to inflation, but they're also linked to risk. The cost of money isn't simply tied to inflation expectations--it's also tied to speculative excesses blowing credit-asset bubbles which implode, destroying the phantom wealth generated by the bubble.

The lenders that survive the implosion are wary of lending money to all but the most conservative, risk-averse, creditworthy borrowers backed by ample collateral. That excludes the majority of households and enterprises.

*  *  *

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Since President Donald Trump took office in mid-January, the Trump administration has employed Elon Musk's Department of Government Efficiency (DOGE) to streamline government operations. This initiative eliminates redundancies, fraud, and waste while leveraging artificial intelligence to automate and reduce bureaucratic inefficiencies.

On Sunday, Elon Musk attended the closed-door Milken Institute Global Conference, where he provided further details on deploying AI to eliminate government inefficiencies, potentially replacing some public sector workers, according to Bloomberg, citing an attendee of the prestigious conference at the Beverly Hilton in Los Angeles.

Musk told financier Michael Milken at the closed-door event, which tickets start at $25,000 and features high-level individuals, including US Treasury Secretary Scott Bessent, Nvidia's Jensen Huang, Citigroup's Jane Fraser, and Citadel's Ken Griffin, how AI will replace some of the federal government's workforce. 

Musk also spoke about his brain implant company, Neuralink, and the development of Starship at his rocket company, SpaceX.

DOGE and the Trump administration bet that AI can replace a sizeable portion of the government workforce—particularly those in administrative, data processing, and customer service roles—to dramatically reduce federal payroll costs, eliminate inefficiencies, and modernize public services. 

Last week, the latest data from global outplacement and executive coaching firm Challenger, Gray & Christmas showed the government had led all sectors in job cuts this year, with 281,452 of those cuts attributed to DOGE-related cost-cutting.

Jobless Claims Jumped Last Week As 'DOGE Actions' Spark Biggest YTD Layoffs Since 2020 https://t.co/mPjuSJiyAH

In an interview, late last week on Fox News' Jesse Watters Primetime, DOGE staffer Edward Coristine, nicknamed "Big Balls," described some shocking examples of waste and mismanagement by unaccountable bureaucrats. 

EXCLUSIVE: @elonmusk and the @DOGE boys EXPOSE reckless spending at the @usedgov. Caesars Palace and stadiums were being rented out for parties on YOUR dime. pic.twitter.com/pShztaGrT5

Yet efforts to eliminate waste and fraud from the federal government have been met with intense opposition from the Democratic Party as the era of unchecked spending ends.

Authored by Lance Roberts via RealInvestmentAdvice.com,

“Resistance is futile” was a sentence that struck fear in the hearts of Trekkie fans during “Star Trek: The Next Generation,” specifically in both of the “Best Of Worlds” and “First Contact” episodes. In those episodes, the “Starship Enterprise” crew encountered a species called the “Borg.” The Borg’s primary purpose was to achieve “perfection” by assimilating other beings and technologies into their “hive mind,” known as the “Collective.” They viewed assimilation as a means to expand their collective knowledge, power, and ultimately, their vision of a perfect and harmonious existence. The reason “resistance was futile” was that the centralized control, driven by the Borg Queen, allowed for swift and coordinated actions across vast distances. At the same time, the assimilation process threatened to erase individuality and homogenize the galaxy. 

I could go on, but you are asking yourself two questions. First, is Lance a total sci-fi geek? Second, what does this have to do with the markets and investing? The answer to the first question is “yes,” as I grew up with William Shatner as James T. Kirk in the original Gene Roddenberry “Star Trek.”

However, let’s dig deeper into the second question.

Over the past two weeks, the market has had a furious nine-day rally, the longest winning streak in 21 years. However, there are two takeaways from such a historic advance. First, it is “bullish” as investors return to the market. However, investors should also recognize that if the rally is the longest in 21 years, then previous such rallies failed. As shown in the chart below, there have been longer rallies, with 14 trading days being the peak. But in every case, it is worth remembering the following:

“‘Record levels’ of anything are records for a reason. It is where the point was reached where previous limits existed. Therefore, when a ‘record level’ is reached, it is NOT THE BEGINNING, but rather an indication of the MATURITY of a cycle.”

That reality exists for any data set, at either extreme. Let’s look at two examples.

The Bearish Example

On April 7th, the day the market bottomed, I wrote an article entitled “Hope In The Fear,” in which we discussed the extremes of “bearish sentiment” and technically oversold conditions. To wit:

“There are times when the probabilities of something happening outweigh the possibilities. Following last week’s market crash, the “probability” of at least a near-term rally outweighs the possibility of a further decline. Does that mean it is guaranteed to happen? No. But, several indicators have historically tilted the odds in the investor’s favor.”

The reason was the extreme technical oversold conditions that existed.

“Whether or not the current market crash is the beginning of a larger corrective cycle, such low readings have, without fail, marked the near-term low of a market correction. While the market has previously continued its corrective process after such low readings, such did not occur without a meaningful reversal rally first.”

When analyzing the market from a technical perspective, technicians watch two primary levels: support and resistance. As always, the demand between buyers and sellers determines stock prices. When the supply of stock for sale overwhelms the demand from buyers, “resistance” occurs, which impedes prices from moving higher. The same happens during declining markets, where resistance (support) to lower prices forms as the demand from buyers overwhelms the supply of stock for sale.

In that April 7th article, we stated that the markets were three standard deviations below long-term moving averages and challenging rising trend lines. In other words, those were previous levels where “resistance was futile,“ such oversold conditions typically precede short-term rallies to allow investors to reduce exposure to equities. We also noted that the target for a tradable rally was between 5500 and 5700. (The market closed at 5686 on Friday.)

Such is why we focus heavily on investor sentiment and positioning. When investors are extremely bearish and are “panic liquidating” equity exposure during a market decline, that is often a contrarian indicator that resistance to a further decline is forming. When sellers become exhausted, it only takes a few buyers to push higher prices. Of course, when resistance to lower prices forms, the media headlines are often the most negative, and investors’ “loss aversion” behavior is the most extreme.

As we concluded in that article:

“It won’t take much for the market to find a reason to rally. That could happen as soon as next week. If the market rallies, we suggest reverting to the basic principles to navigate what we suspect will be more volatile this year. However, at some point, just as we saw in 2022, the market will bottom. Like then, you won’t want to believe the market is bottoming; your fear of buying will be overwhelming, but that will be the point you must step in.

Buying near market lows is incredibly difficult. While we likely aren’t there yet, we will be there sooner than you imagine. As such, when you want to ‘sell everything,’ ask yourself if this is the point where you should ‘buy’ instead.“

But what about the bull case?

Resistance For The Bulls

As with the bears, “resistance is futile” for the bulls just as much. As noted above, the market has had the longest “positive day” stretch in 21 years. While the media is becoming more convinced that the “bulls are back in town,” which is probably true, it should also be a warning that “resistance” to higher prices is forming since such previous winning streaks have failed.

As noted above, the relentless market rally has pulled many investors back into the market over the last few weeks. Sentiment has quickly changed from extremely bearish to bullish, and professional investors have rapidly ramped up exposures. While sentiment and positioning are not yet back to extremes, the market has technically reversed much of its previous oversold and technically deviated conditions.

Most notably, the market is now approaching the 200-DMA, which is a level at which many buyers were stepping in before the “Liberation Day” market plunge. Many buyers are close to getting back to even and will likely be inclined to sell as they approach breakeven. Furthermore, the 100-DMA, which is close to crossing the 200-DMA, provides further resistance. As noted in “Death Cross,” these moving average crossovers impede further price advances until they reverse.

The 100 and 200-DMA moving averages have historically defined market trends. For example, the 100-DMA (blue line) supported market pullbacks during 2021 and since the October 2022 lows. Conversely, those moving averages defined the peaks of reflexive rallies during the 2022 correction. With the markets again trading below those averages, seeing sellers emerge as markets approach those resistance levels would be unsurprising.

Is the current correction over, and is the bull market resuming? Maybe. We certainly saw such a situation in the summer of 2023, when the markets declined 10%, a “death cross” occurred, and markets immediately bottomed and surged to new highs. Then, like today, there was a surge in corporate buybacks and a quick reversal of very bearish sentiment. However, as shown in the chart above, even if we are experiencing a 2023-type scenario, there will be short-term corrections and pullbacks, providing investors an entry point to increase equity exposure as needed.

So, how do we know if the current market is like 2022 or 2023? Should investors be selling rallies or buying dips?

Beating The Borg

In Star Trek, the crew of the Enterprise eventually defeats the Borg through a combination of strategic attacks and exploiting weaknesses in their collective structure. The crew of the USS Enterprise-D, led by Captain Picard, used their access to the Borg collective, through Picard’s assimilation, to their advantage and were able to disable and destroy the Borg cube by exploiting its regeneration subroutines. Unfortunately, defeating the “collective” of our emotional biases when investing isn’t much easier, but it is possible.

Interestingly, when I write posts like these, someone often comments, “Why won’t you just tell us whether the market is going up or down?” It’s a fair statement, but unfortunately, I am not prescient, nor is anyone else, and navigating markets does not work like that.

If I want to be bearish, it is easy to state the market is at resistance and about to crash, so you better “get out now.” Or, if I wanted to be bullish, I could point to October 2022 and make the case why markets are about to surge higher. Either prediction has a decent chance of being wrong, leaving investors on the wrong side of the trade. As such, this is why we don’t predict, but instead navigate the current market for the possibilities versus the probabilities.

Historically speaking, when markets break longer-term moving averages, the first attempt at reversal often fails. Notice that I said “often” and not “always.” That is because sometimes markets do the unexpected, and, as investors, we must be able to recognize the change and respond accordingly. Such is why we never recommend entirely getting out of markets.

In a recent #BullBearReport entitled Spock & The Logic-Based Approach To Investing, we discussed that as investors, we must weigh possibilities and probabilities and manage our risk accordingly. To wit:

“Investing means cutting through noise, avoiding speculation, and relying on data. For example, the media is jammed with emotionally charged headlines about tariff-induced trade wars, recessions, and de-dollarization. In reality, those events rarely occur. The chart below shows a normally distributed bell curve of potential events and outcomes. In simple terms, 68.26% of the time, typical outcomes occur. Economically speaking, such would be a normal recession or the avoidance of a recession. 95.44% of the time, we are most likely dealing with a range of outcomes between a reasonably deep recession and standard economic growth rates. However, there is a 2.14% chance that we could see another economic crisis like the 2008 Financial Crisis. But what about “economic armageddon?” That event where nothing matters but ‘gold, beanie weenies, and bunker.’ That is a 0.14% possibility.“

So, Where Are We Now

If you want my best guess, here it is:

• We’ve likely seen the market lows for this year.
• We’ve likely seen the highs as well.

Navigating a market trapped between support and resistance becomes emotionally challenging. Investors face sharp rallies into resistance — and retracements back to support — wearing down sentiment until mistakes happen.

Therefore, this is how we are positioned in this current and uncertain market environment.

• Primarily long equities, as the market structure remains bullish.
• Increased cash levels to manage policy and growth uncertainty.
• Short S&P 500 index to hedge downside risk.

We also recommend a healthy portfolio and risk management regimen.

1. Tighten up stop-loss levels to current support levels for each position.
2. Hedge portfolios against more significant market declines.
3. Take profits in positions that have been big winners.
4. Sell laggards and losers.
5. Raise cash and rebalance portfolios to target weightings.

Here’s the hard truth: you can’t measure risk in advance.

Markets are unpredictable, and while we can guess what might happen, the future is uncertain. When we think about risk, most of us focus on the risk of losing money. However, there are other risks we should be aware of, like missing out on gains by playing it too safe or being forced to sell investments during a market crash. Both can be just as damaging to our portfolios in the long run. We don’t have any foresight into what the market will do next week or month.

All we can do is remain focused on our portfolio, manage the risk of “being wrong,” and realize that “resistance is futile” when investing in the market. As Howard Marks once penned:

“Too little skepticism and too much eagerness in an up-market – just like too much resistance and pessimism in a down-market – can be very bad for investment results.“

Just something to think about.

Now, “Make it so.”

'Soft' survey data continues to slump into this morning's Services PMIs as Manufacturing PMIs were weak and Regional Red surveys were a disaster (despite still solid labor market 'hard' data)

The S&P Global Services PMI fell from 54.4 to 50.8 (below the 51.4 flash print) in final April data - the lowest since Oct 2023.

The ISM Services PMI rose from 50.8 to 51.6 (well above the decline to 50.2 expected).

So baffle 'em with bullshit is back:

The ISM print was better than all but one expectations...

Under the hood, the picture is not so pretty with Prices Paid at the highest since Jan 2023 (even though New Orders and Employment picked up modestly)...

 “The past relationship between the Services PMI® and the overall economy indicates that the Services PMI® for April (51.6 percent) corresponds to a 1-percentage point increase in real gross domestic product (GDP) on an annualized basis,” according to PMI.

The S&P Global US Composite PMI® fell to 50.6 in April, down from March’s 53.5 and its lowest level since September 2023.

"While tariff announcements mean manufacturing dominates the news, a worrying backstory is developing in the vastly larger services economy, where business activity and hiring have come closer to stalling in April amid plunging business confidence,"  Chris Williamson, Chief Business Economist at S&P Global Market Intelligence warns that:

"Business and consumer facing service providers alike, and especially financial services firms, are reporting markedly weaker growth prospects, citing intensifying uncertainty over the economic outlook amid recent tariff announcements and ongoing federal spending cuts."

"A key area of weakness is slumping exports of services, which is now falling at rate not seen since 2022, but domestic demand is also reportedly waning as confidence slides lower.

But the stagflationary aspects seen in the Manufacturing survey are also showing up in Services...

"Higher prices paid for imports due to tariffs are also driving up service sector firms’ costs, feeding though to higher prices, notably in consumer-facing industries such as restaurants and hotels.

"The resulting bottom line from the services sector is a heightened risk of stalling growth and rising inflation, or stagflation."

Bad enough news for Fed cuts? Or hot enough stagflation to leave Powell on pause for longer?

After the busiest week of Q1 earnings season, and a blockbuster week for macro, which included a stronger than expected jobs report, we enter a week that should see attention turn back towards central banks, with the latest Fed (Wed) and BoE (Thu) decisions due. These come as markets have largely shaken off the tariff-driven stress of the past few weeks, as rising optimism on tariff de-escalation and Friday’s solid US payrolls print brought the S&P 500 back above its pre-Liberation Day level, with the index posting its longest winning streak since 2004. Admittedly, the recovery has been far from even across asset classes. A notable laggard is the US dollar, trading nearly -4% below April 2 levels this morning. Investors will continue to keenly watch the tariff headlines and peruse the latest evidence of tariff impacts in this week’s data ranging from the US April ISM services (today) to German factory orders (Wed) and China’s April trade data (Fri).

The full day by day week ahead is at the end as usual, but the main highlight will be the Fed's decision on Wednesday and Chair Powell's press conference afterwards. Most economists expect the Fed to keep rates steady and avoid explicit forward guidance about the policy path ahead. They see the overall tone as likely to echo recent Fed comments that the administration's policies are likely to push the economy away from the Fed's dual mandate objectives for a period of time but that monetary policy is "well positioned" to respond to the evolving outlook. Rate cut expectations were pushed back after the strong jobs report, with risks for further easing contingent on a weaker labor market rather than the Fed delivering pre-emptive cuts. Fed funds futures are pricing a 37% chance of a cut by the next meeting in June, with a full 25bp cut priced by July.

In terms of the rest of the week ahead, central banks will also be in focus in Europe, with policy decisions from the UK, Norway and Sweden all due on Thursday. The BoE is expected to deliver a 25bp cut that would take the Bank Rate to 4.25%, while Norges and Riksbank are expected to keep rates on hold. Meanwhile, the ECB will hold an informal meeting on May 6-7 to discuss its 2025 monetary policy strategy assessment, which our European economists preview here.

Turning to economic data, in the US the main test ahead of the Fed will be today’s April ISM services reading, which economists see declining to 50.3 from 50.8. That comes as the April data so far, including a decent US ISM manufacturing print last week, have shown few signs of either the US or the global economy ‘breaking’ from the tariff turmoil even as sentiment indicators paint a worrying picture.

It will be a pretty quiet data week in Europe, with Germany’s factory orders (Wed) and industrial production (Thu) prints the highlights, while in Asia the April trade figures out of China (Fri) are expected to show a material slowing amid the tariff disruption.

In corporate earnings, key US releases include Palantir, AMD, Walt Disney and Uber. In Europe, earnings from the likes of Novo Nordisk, Siemens Energy, AP Moller-Maersk, BMW, AB InBev and Rheinmetall will be of extra interest in light of the trade tensions.

Courtesy of DB, here is a day-by-day calendar of events

Monday May 5

• Data: US April ISM services, Switzerland April CPI
• Earnings: Vertex, Williams, CRH, Ares, Diamondback Energy, Ford, BioNTech, ON Semiconductor
• Auctions: US 3-yr Notes ($58bn)

Tuesday May 6

• Data: US March trade balance, China April Caixin services PMI, UK April official reserves changes, new car registrations, France March industrial production, Italy April services PMI, Eurozone March PPI, Canada March international merchandise trade
• Earnings: Palantir, AMD, Arista Networks, Intesa Sanpaolo, Ferrari, Constellation Energy, Zoetis, Marriott, Coupang, Fidelity, Electronic Arts, Datadog, IQVIA, Rivian, Vestas, Astera Labs, Zalando
• Auctions: US 10-yr Notes ($42bn)

Wednesday May 7

• Data: US March consumer credit, China April foreign reserves, UK April construction PMI, Germany March factory orders, April construction PMI, France March trade balance, current account balance, Q1 wages, private sector payrolls, Italy March retail sales, Eurozone March retail sales, Sweden April CPI
• Central banks: Fed's decision
• Earnings: Teva, Novo Nordisk, Walt Disney, Uber, ARM, MercadoLibre, DoorDash, Fortinet, Siemens Healthineers, BMW, Carvana, Axon, Vistra, Flutter Entertainment, Occidental Petroleum, Barrick Gold, Legrand, Rockwell Automation, Vonovia, Orsted, Pandora, Telecom Italia, Sandisk

Thursday May 8

• Data: US Q1 nonfarm productivity, Q1 unit labor costs, March wholesale trade sales, April NY Fed 1-yr inflation expectations, initial jobless claims, UK April RICS house price balance, Germany March industrial production, trade balance
• Central banks: BoE, Riksbank and Norges Bank decision, BoJ minutes of the March meeting, BoE's April DMP survey, BoC financial stability report
• Earnings: Toyota Motor, AB InBev, Shopify, ConocoPhillips, Nintendo, DBS, McKesson, Enel, Rheinmetall, Siemens Energy, Coinbase, Cheniere Energy, Infineon, Kenvue, HubSpot, TKO Group, Leonardo, AP Moller - Maersk, Warner Bros Discovery, Toast, Expedia, Pinterest, DraftKings, Affirm, Tapestry, Illumina, Banca Monte dei Paschi di Siena, Rocket Lab, Paramount Global, Davide Campari-Milano, Crocs, Lyft, Puma, Peloton, Sweetgreen
• Auctions: US 30-yr Bonds ($25bn)

Friday May 9

• Data: China April trade balance, Q1 BoP current account balance, Japan March labor cash earnings, household spending, leading index, coincident index, Italy March industrial production, Canada April jobs report, Norway April CPI
• Central banks: Fed's Williams, Waller, Kugler, Goolsbee and Barr speak, ECB's Simkus and Rehn speak, BoE's Bailey and Pill speak

Earnings: Mitsubishi Heavy Industries, Recruit Holdings, Commerzbank, Cellnex

* * *

Finally turning to the US, the key economic data release this week is the ISM services report on Monday. The May FOMC meeting is on Wednesday. The post-meeting statement will be released at 2:00 PM ET, followed by Chair Powell’s press conference at 2:30 PM. There are several speaking engagements by Fed officials on Friday, when the blackout period for the May FOMC meeting ends.

Monday, May 5

• 09:45 AM S&P Global US services PMI, April final (consensus 51.2, last 51.4)
• 10:00 AM ISM services index, April (GS 49.8, consensus 50.3, last 50.8): We estimate that the ISM services index declined by 1pt to 49.8 in April, reflecting sequential softening in our non-manufacturing survey tracker (-1.1pt to 49.4 in April).

Tuesday, May 6

• 08:30 AM Trade balance, March (GS -$138.0bn, consensus -$136.7bn, last -$122.7bn): We estimate that the trade deficit widened to $138.0bn in March, reflecting higher imports ahead of tariff increases and a modest decline in travel exports as a result of foreign boycotts.

Wednesday, May 7

• There are no major economic data releases scheduled.
• 02:00 PM FOMC statement, May 6-7 meeting:  We expect the FOMC to leave the fed funds rate unchanged at its May meeting and pushed back the first rate cut in our forecast to the July FOMC meeting (vs. June previously) after stronger-than-expected payrolls and ISM readings last week. As discussed in our FOMC preview, we expect Chair Powell to highlight that tariffs pose risks to both sides of the FOMC’s dual mandate goals of maximum employment and price stability. While the FOMC appears to be setting a higher bar for rate cuts than during the 2019 trade war, we do not think that high inflation would deter it from cutting if the unemployment rate begins to trend higher as the tariff shock hits the economy.

Thursday, May 8

• 08:30 AM Nonfarm productivity, Q1 preliminary (GS -0.9%, consensus -0.7%, last +1.5%); Unit labor costs, Q1 preliminary (GS +5.2%, consensus +5.2%, last +2.2%);
• 08:30 AM Initial jobless claims, week ended May 3 (GS 225k, consensus 230k, last 241k): Continuing jobless claims, week ended April 26 (consensus 1,892k, last 1,916k)
• 11:00 AM New York Fed 1-year inflation expectations, April (last +3.58%); New York Fed 3-year inflation expectations, April (last +3.00%); New York Fed 5-year inflation expectations, April (last +2.86%): The New York Fed will release its measures of inflation expectations for April. The University of Michigan’s 12-month measure of inflation expectations increased by 1.5pp in April on the back of news about tariffs.

Friday, May 9

• There are no major economic data releases scheduled.
• 06:15 AM New York Fed President Williams (FOMC voter) speaks: New York Fed President John Williams will deliver a keynote address and will take part in a Q&A at the Reykjavik Economic Conference. Text and moderated Q&A are expected. On April 11th, Williams said that “the current modestly restrictive stance of monetary policy is entirely appropriate given the solid labor market and inflation still above our 2 percent goal,” noting that it positions the FOMC “well to adjust to changing circumstances that affect the achievement of our dual mandate goals.”
• 06:45 AM Fed Governor Barr speaks: Fed Governor Michael Barr will deliver a speech on artificial intelligence and the labor market at the Reykjavik Economic Conference. Text and Q&A are expected.
• 08:30 AM Fed Governor Kugler speaks: Fed Governor Adriana Kugler will deliver a speech on maximum employment at the Reykjavik Economic Conference. Text and Q&A are expected. On April 22nd, Kugler said she supported “maintaining the current policy rate for as long as these upside risks to inflation continue, while economic activity and employment remain stable.”
• 10:00 AM Chicago Fed President Goolsbee (FOMC voter) speaks: Chicago Fed President Austan Goolsbee will deliver opening remarks at a Fed Listens event in Chicago. On April 21st, Goolsbee said that the FOMC would want “to figure out the throughline” of where tariff policies ultimately settle, how much retaliation there will be, and how much impact the tariffs will have on supply chains “before we jump to action” on monetary policy.
• 11:30 AM New York Fed President Williams (FOMC voter) and Fed Governor Waller speak: New York Fed President John Williams and Fed Governor Christopher Waller will take part in a panel discussion titled “John Taylor and Taylor Rules in Policy” at the Hoover Institution’s Monetary Policy Conference. Text and Q&A are expected. On April 14th, Waller said he thought “monetary policy is meaningfully restricting economic activity” and that if high tariffs induce a slowdown that is “significant and even threatens a recession, then I would expect to favor cutting the FOMC’s policy rate sooner, and to a greater extent, than I had previously thought.” That said, Waller also noted that he would support “a more limited monetary policy response” in a smaller-tariff scenario with limited effects on inflation and growth.
• 07:45 PM St. Louis Fed President Musalem (FOMC voter), Cleveland Fed President Hammack (FOMC non-voter), and Fed Governor Cook speak:  St. Louis Fed President Alberto Musalem, Cleveland Fed President Beth Hammack, and Fed Governor Lisa Cook will take part in a panel discussion at the Hoover Institution’s Monetary Policy Conference. Text is expected for President Musalem and Governor Cook’s remarks. Q&A is expected. On April 11th, Musalem judged that “monetary policy is currently well positioned given the state of the economy and the balance of risks.” On April 16th, Hammack noted that she would rather “be slow and move in the right direction than move quickly in the wrong direction.” And on April 5th, Cook noted that she placed “more weight on scenarios where risks are skewed to the upside for inflation and to the downside for growth,” and that those scenarios “could pose challenges for monetary policy.”

Soruce: DB, Goldman

The Trump administration has unveiled an early discretionary spending request ahead of its formal FY2026 budget submission. The proposal aims to cut discretionary funding by $140 billion - roughly 0.5% of GDP, and significantly shift the balance between defense and non-defense spending.

According to Goldman Sachs' Alec Phillips, the proposal would reallocate $119 billion (0.4% of GDP) from non-defense agencies to defense and border-security-related activities. This includes a $163 billion allocation for FY2026 as part of a broader $325 billion funding assumption for defense and border security within a forthcoming budget reconciliation package. Non-defense agencies - excluding departments such as Homeland Security and Justice - would face an average cut of 23%.

Yet, these headline figures may exaggerate the near-term fiscal impact, as Congress is likely to authorize higher spending than the White House proposes, resulting in only a modest 1% decline in discretionary spending in real terms for FY2026.

Proposed Shift from Non-Defense to Defense Spending

The Office of Management and Budget (OMB) is proposing a $140 billion reduction in discretionary funding, equivalent to 0.5% of GDP, for FY2026. Of this, $119 billion (0.4% of GDP) would be shifted from non-defense to defense spending, with civilian agencies outside of Homeland Security and Justice facing average cuts of 23%.

This marks a sharp shift in tone from previous administrations, including the first Trump term, which often signaled concern about the deficit but ultimately supported expansive spending. As Academy Securities notes:

“Unlike in Trump 1.0 (and pretty much in every other administration which all claimed to be somewhat cautious on the deficit but then spent on everything), there is austerity here.”

The proposal assumes Congress will provide $325 billion in funding for defense and border security in the upcoming reconciliation package, with $163 billion allocated for FY2026.

Realized Spending Cuts Will Likely Be Smaller

Despite the headline cuts, Phillips anticipates only a modest decline in actual spending from this segment in FY2026 for several reasons:

• Delayed outlays: Agencies typically spend appropriated funds over multiple years. Historically, just over half of fiscal year appropriations are spent in the same year.

• Expiration of emergency funds: Most of the proposed net reduction reflects the non-renewal of $118 billion in emergency spending passed in late 2024. Goldman had not expected that amount to be renewed, while the Congressional Budget Office projects the spending out of those funds to be even slower than usual.

• Slow disbursement of past emergency funds: The Congressional Budget Office (CBO) projects that only half of the 2024 emergency funds would be spent in 2025–2026.

These points suggest that the actual decline in spending will be far smaller than top-line figures imply.

From Academy Securities’ vantage point, that could help assuage markets:

“That should help interest rates if it looks like the budget can progress without the austerity measures being dramatically reduced (always a possibility in D.C.).”

Legislative Timing Likely to Delay Final Budget

Phillips projects that Congress is unlikely to settle spending totals for this segment of the budget until much later in 2025. A reconciliation bill that includes supplemental funds for defense and border security is not expected before early August, while standard appropriations bills could take even longer.

This raises the risk of a government shutdown when the new fiscal year begins on October 1, though analysts expect the government to operate under continuing resolutions (CRs) that keep funding flat in nominal terms - possibly well into 2026.

As Academy notes, these delays may begin to have market effects:

“Negotiations will start to move markets in the coming weeks.”

Budget Deficit Expected to Hold Steady Despite Spending Cuts

Even with slightly lower discretionary outlays, Goldman forecasts a 1% real decline in the portion of federal spending that contributes to GDP. However, this is outweighed by rising mandatory spending, which continues to grow due to entitlements and interest obligations.

On the revenue side, Goldman expects:

• Modestly higher tariff revenue, but

• Offsetting declines in income and payroll taxes, due to both a downgraded growth outlook and the likely extension of Trump-era tax cuts.

Academy Securities adds a key nuance:

"Only additional or new tax cuts will really be stimulative. The extension of existing cuts... won’t be a boost to the economy since virtually no one is adjusting their spending on the assumption that those won’t be extended."

In other words, extending the current tax cuts may prevent a drag on consumption, but will not provide meaningful new stimulus. Conversely, failure to extend them could cause a sharp pullback.

Ultimately, Goldman projects:

• FY2026 deficit: $1.95 trillion, or 6.2% of GDP

• FY2027 deficit: $2.15 trillion, or 6.6% of GDP

Bottom Line

The 2026 budget proposal introduces a rhetorical commitment to austerity that differentiates it from past White House strategies. But procedural hurdles, slow disbursement of prior-year funds, and political resistance in Congress suggest that the real-world impact on fiscal aggregates may be modest—at least in the near term.

Markets are likely to begin reacting as budget negotiations progress, particularly as the fate of tax policy and defense spending becomes clearer.