Tariff talk has dominated financial headlines because it represents a potential 1.4% (annualized) drag on GDP.
But the current administration’s rollout is also freezing capex, targeting migrants, and floating cuts to Medicaid, SNAP, the NSF, and NIH.
These matter at least as much.
Let’s break it down: 🧵👇
1. Structural Headwinds to GDP
Here’s a conservative estimate of potential GDP drag from ongoing policy shifts.
My sense is that the tariff impact is most understated, but I've given you the sources that I'm working from to make your own assessment.
Totalling that Up: ~4.32% drag if all are realized.
Even with a partial rollout, the impact is real.
2. A Conservative Read Still Shows a 1.96% Drag
Let’s strip this down to a "bare minimum" estimate:
✅ No Medicaid/SNAP cuts
✅ Science cuts overestimated by 50%
✅ Capex rebound partially recovers
Even then, GDP drag still rounds out to about 1.96%.
That’s not recessionary—but it’s a real slowdown, and it arrives at the worst possible moment.
3. High Valuations Have No Room for Slowdowns
Equities are expensive.
The S&P 500 has rebounded to pre-April levels, despite firms issuing weaker EPS guidance across the board.
That means valuations (multiples) have expanded while earnings have fallen.
The CAPE ratio is near Dot Com levels. A 1.96% GDP drag is plenty to justify multiple contraction.
4. What This Means for Bitcoin
BTC (in orange) trades like high-beta tech—just bigger and faster.
Its 120-day correlation with the S&P 500 (in blue) sits at 0.73. This means that there is no uncoupling yet AND that we can measure if (when) that does happen.
📉 If the S&P 500 drops 30% (on valuation reset alone),
📉 Bitcoin is likely to fall ~50%,
📉 Altcoins? Historically around 2.4x the S&P500, or ~72% down.
We’re still in black bear territory.
5. Summary: Caution Is a Position Too
The economy isn’t falling apart—but it is slowing in multiple structurally driven ways.
Markets may rally, but if macro policy remains unchanged, those rallies are rallies within a bear market.
📉 High valuations
📉 Slowing growth
📉 Tighter Fed
📉 Rising policy risk
That’s not a bet you want to YOLO into. Play it smart.
As always: NFA, DYOR. Happy Trading!
