“Elected” Trump? This wave of American citizens is the first to be sacrificed, used for federal deleveraging and industrial return. $Tesla(TSLA.US) $NASDAQ Composite Index(.IXIC.US) $iShares Semiconductor ETF(SOXX.US)

Dolphin Research mentioned earlier that Trump's economic governance philosophy (see the link below).

But the order of this philosophy is very important.

And Trump, in practice, is clearly not about cutting taxes first and then raising tariffs. This is actually the familiar concept of "breaking before establishing" from the past two years domestically. In this process of "breaking before establishing," the interests of ordinary citizens are the first to be sacrificed.

Raising tariffs is indeed a way to protect domestic vulnerable industries, aimed at promoting industrial return. However, in reality, the cost of raising tariffs is not only borne by exporters; in the case where the U.S. cannot quickly replace domestic production capacity and user demand still exists, the end consumers need to bear part of the product premium brought by tariffs.

Moreover, from the perspective of Trump's first month in office, the so-called government cost reduction and efficiency improvement, and expenditure reduction, have not been reflected in the federal deficit for February—In January, the U.S. fiscal deficit, including interest costs, was nearly $130 billion, while excluding interest payments, it still stood at a deficit of $49 billion. (PS Currently, there are only some signs of a slowdown in federal hiring in the new employment structure for February.)

Additionally, as it aims to make tax cuts permanent, the places where fiscal revenue can increase are very limited, while fiscal expenditure is very necessary; thus, the U.S. debt balance can only control the slope of its increase, and the upward trend is absolutely certain. Historically, during peacetime in the U.S., there has been basically no reduction in the absolute value of fiscal expenditure.

From the current results, in the detailed expenditure structure of the budget, Trump has chosen interest payments (which account for 13% of total federal expenditures) as the main operational target.

The newly appointed Treasury Secretary does not agree with Yellen's approach of issuing short-term debt as a stopgap, and currently, the proportion of short-term debt in the U.S. is too high; after maturity, if it is replaced with long-term debt to extend its life, the yield on long-term debt will become very important.

Raising tariffs may fuel short-term inflation, but after long-term growth becomes uncertain, the yield on long-term debt can drop, even leading to an inverted yield curve.

In this process, ordinary American citizens will bear part of the cost of raising tariffs, leading to a relative decline in purchasing power, but once the yield on long-term debt decreases, the government's cost of borrowing long-term funds will also decrease.

To some extent, this can be understood as a reversal of the helicopter money during the pandemic, where the government concentrated on absorbing private leverage; now it is doing the opposite: residents are starting to become the force-bearing units for government deleveraging, and what was originally absorbed must be partially expelled.

Throughout the process, there is also an effort to maintain the relative bargaining power of enterprises compared to residents, or to protect the main body of employment.

But the key issue here is that expectation management is a super significant behavioral economics concept; it is hard to say that once residents' expectations worsen, they will directly enter a state of precautionary savings.

However, with such a significant policy shift, from the perspective of the stock market, facing this level of uncertainty in policy upheaval, the only thing funds can do is to run away first; after all, valuations were too high to begin with, and once they start running, there is no hesitation, just swift action.

Therefore, this wave of decline in the U.S. stock market can initially look favorably at previously unattainable high-quality companies, but there is no need to rush to bottom-fish; it is better to first observe the changes in the rhetoric of Trump and the Treasury Secretary.

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