Is Trump "stirring" the American economy, playing a bigger game?

The tariff threats and economic policies of the Trump administration have triggered market turbulence, but insiders on Wall Street believe this is actually a carefully designed "four-dimensional chess" (a metaphor for complex, multi-dimensional, and well-thought-out strategies).

Recently, a top fund CIO nicknamed Lone Star revealed that the strategic combination of Trump and Treasury Secretary Mnuchin—raising tariffs to pay for tax cuts, depressing tech stock valuations, lowering long-term interest rates, and forcing the Federal Reserve to cut interest rates—is actually a complex and sophisticated plan aimed at laying the groundwork for economic growth by the end of 2025 to early 2026 and paving the way for the midterm elections.

Despite short-term market volatility intensifying, in the medium to long term, this policy combination could bring a return of 10-14% to the stock market, especially if corporate taxes are significantly reduced and advancements in artificial intelligence continue to drive growth. Lone Star stated:

“This is actually just a trivial commotion; they are basically saying, let’s pay for the tax cuts by raising tariffs, and the resulting uncertainty will push down the 10-year Treasury yield, which is exactly what we want.”

He interpreted the thoughts of Treasury Secretary Mnuchin and Trump as packaging this policy as a measure to save mainstream American society, even if it puts pressure on tech stock valuations, as the government has never been particularly friendly to these companies. More importantly, if the economy slows down, inflation will subsequently decrease, and the Federal Reserve will be forced to cut interest rates, which is exactly the outcome the government hopes for.

Lone Star also mentioned that a large-scale tax cut policy is imminent:

“The lagging effects of tax cuts, regulatory reforms, and Federal Reserve interest rate cuts will be concentrated in the fourth quarter of 2025 and the first quarter of 2026, with annualized GDP growth rates exceeding 3%. We will address some of the current debt, social welfare, and valuation issues through growth. Of course, this conveniently brings us into the hot phase of the midterm election season, which is what really matters.”

Despite the prevailing pessimism in the market, including the possibility of more tariff threats or actual actions, Lone Star believes that what they are doing makes sense in the long run, and that people are overreacting to Trump, while Mnuchin is the one truly planning the necessary changes.

From an investment perspective, Lone Star calculated that at market peaks, based on earnings growth estimates for the next few years, the market is pricing an annual return of 5% (assuming no P/E expansion). Additionally, if these conditions remain unchanged, he expects the IRR (internal rate of return) from now on to be close to 10%:

“If the index drops another 5-7%, then the IRR for the next few years could reach 12-14%, which is quite attractive and could mark the end of this round of adjustments.”

Lone Star tends to be conservative, but he is also optimistic that artificial intelligence will become more attractive in the next two years, coupled with accelerated economic growth, making it easy for market valuation multiples to re-expand. He stated that if large-scale corporate tax cuts are achieved, earnings growth could significantly increase Risk Warning and Disclaimer

The market has risks, and investment should be cautious. This article does not constitute personal investment advice and does not take into account the specific investment goals, financial situation, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article are suitable for their specific circumstances. Investment based on this is at one's own risk