Global Growth Forecast Cut; TACO And Blind Money Support The Stock Market

To gain an edge, this is what you need to know today.

Global Growth Forecast Cut

Please click here for an enlarged chart of U.S. dollar index (USDX, DX, DXY).

Note the following:

• The chart shows the fall in the dollar in 2025.
• The chart shows the dollar index has fallen to the bottom band of zone 1 (support).
• Prudent investors should be alert to the dollar breaking below the low band of the support zone.  
• A strong currency is the hallmark of a strong country.  It is especially important for the U.S. because the U.S. owes its prosperity, in large part, to the dollar being the world's reserve currency.  If the dollar falls further, it will be very negative for the U.S. in the long term.  The short term is a different story.
  • The momo crowd will celebrate the fall in the dollar by buying stocks.
  • The S&P 500 has a large number of multinational companies.  When earnings from overseas are translated into dollars, earnings will have the appearance of going up.  Less knowledgeable investors will buy into higher earnings and aggressively buy stocks.
  • In the short term, the stock market will likely go up.
  • In the longer term, a fall in the dollar will be devastating.  As always, as members of our report, you will be able to act in advance to protect and grow your wealth.  It is important to build your knowledge ahead of time, so that if such a time comes, you will be ready to act with conviction.  
• Of note for prudent investors is that the Organization for Economic Co-operation and Development (OECD) has lowered the growth forecast for the world and for the U.S.  OECD is a highly respected Paris based organization of 38 countries with the mission to promote growth and stability.
  • OECD is citing tariffs as the trigger to reduce its forecast.
  • U.S. growth is projected to drop to 1.6% in 2025 and 1.5% in 2026.  As a reference, the prior forecast was 2.2% and the U.S. grew by 2.8% in 2024.
  • The global growth forecast is being reduced to 2.9% in 2025 and 2026.  As a reference, global growth was 3.3% in 2024.
• For the time being, the stock market is oblivious as the following three factors dominate:
  • Blind money flowing into the stock market 
  • Aggressively buying by the momo crowd
  • Wall Street doubling up on TACO trade (Trump Always Chickens Out)
• The stock market has correctly figured out that, at this time, President Trump is sensitive to the stock market.  The White House is going out of its way to create hope.  The latest hope driving buying in the stock market is President Trump pushing to have a phone call with President Xi of China.
• Also driving buying in the stock market is President Trump giving several countries a deadline to submit their best trade proposals.
• Adding to the buying in the stock market is President Trump's "big beautiful bill" heading to the Senate.  The momo crowd is excited about tax cuts, higher government spending resulting in higher deficits, and higher government borrowing.  The momo crowd believes that all of these will take the stock market to a new high.  The hopium is S&P 500 going to 7000 quickly.
• The problem for all of the bullishness in the stock market is that the bond market and the dollar may get in the way.  Unlike the stock market, the bond market and the currency market are very concerned about the higher deficit and higher borrowing that will result from President Trump's "big beautiful bill."
• In important news, especially for AI, at its annual meeting Taiwan Semiconductor Manufacturing Co. Ltd. (TSM) CEO C.C. Wei is very bullish and believes tariffs will not impact TSM as the company will be able to pass them on.  TSM is important because it is the main manufacturer of chips for companies such as NVIDIA Corp (NVDA), Advanced Micro Devices Inc (AMD), Apple Inc (AAPL), and Qualcomm Inc (QCOM).
• In a boost for nuclear power, Meta Platforms Inc (META) is striking a deal to buy about 1.1 gigawatts of electricity from Clinton nuclear plant in Illinois.  Clinton is owned by Constellation Energy Corp (CEG).  Nuclear stocks such as Vistra Corp (VST), Oklo Inc (OKLO), Nano Nuclear Energy Inc (NNE), Nuscale Power Corp (SMR), Lightbridge Corp (LTBR), and Centrus Energy Corp (LEU) are seeing aggressive buying in the early trade.  The buying may fizzle out as the day progresses.
• JOLTS job openings was released at 10am ET.

Magnificent Seven Money Flows

In the early trade, money flows are positive in Nvidia (NVDA) and Tesla Inc (TSLA).

In the early trade, money flows are neutral in Amazon.com, Inc. (AMZN), Microsoft Corp (MSFT), Meta (META), and Apple (AAPL).

In the early trade, money flows are negative in Alphabet Inc Class C (GOOG).

In the early trade, money flows are neutral in SPDR S&P 500 ETF Trust (SPY) and Invesco QQQ Trust Series 1 (QQQ).

Momo Crowd And Smart Money In Stocks

Investors can gain an edge by knowing money flows in SPY and QQQ.  Investors can get a bigger edge by knowing when smart money is buying stocks, gold, and oil.  The most popular ETF for gold is SPDR Gold Trust GLD.  The most popular ETF for silver is iShares Silver Trust SLV.  The most popular ETF for oil is United States Oil ETF USO.

Bitcoin

Bitcoin is range bound.

Arora Protection Band And What To Do Now

It is important for investors to look ahead and not in the rearview mirror.  Our proprietary Protection Band puts all of the data, all of the indicators, all of the news, all of the crosscurrents, all of the models, and all of the analysis in an analytical framework that is easily actionable by investors.

Consider continuing to hold good, very long term, existing positions. Based on individual risk preference, consider a protection band consisting of cash or Treasury bills or short-term tactical trades as well as short to medium term hedges and short term hedges. This is a good way to protect yourself and participate in the upside at the same time.

You can determine your protection bands by adding cash to hedges.  The high band of the protection is appropriate for those who are older or conservative. The low band of the protection is appropriate for those who are younger or aggressive.  If you do not hedge, the total cash level should be more than stated above but significantly less than cash plus hedges.

A protection band of 0% would be very bullish and would indicate full investment with 0% in cash.  A protection band of 100% would be very bearish and would indicate a need for aggressive protection with cash and hedges or aggressive short selling.

It is worth reminding that you cannot take advantage of new upcoming opportunities if you are not holding enough cash.  When adjusting hedge levels, consider adjusting partial stop quantities for stock positions (non ETF); consider using wider stops on remaining quantities and also allowing more room for high beta stocks.  High beta stocks are the ones that move more than the market.

Traditional 60/40 Portfolio

Probability based risk reward adjusted for inflation does not favor long duration strategic bond allocation at this time.

Those who want to stick to traditional 60% allocation to stocks and 40% to bonds may consider focusing on only high quality bonds and bonds of five year duration or less.  Those willing to bring sophistication to their investing may consider using bond ETFs as tactical positions and not strategic positions at this time.

The Arora Report is known for its accurate calls. The Arora Report correctly called the big artificial intelligence rally before anyone else, the new bull market of 2023, the bear market of 2022, new stock market highs right after the virus low in 2020, the virus drop in 2020, the DJIA rally to 30,000 when it was trading at 16,000, the start of a mega bull market in 2009, and the financial crash of 2008. Please click here to sign up for a free forever Generate Wealth Newsletter.