Markets Rebound from China Tariff Threats, OpenAI’s Broadcom Deal & JPM’s America-First Plan
Timestamps are as accurate as they can be but may be slightly off. We encourage you to listen to the full context.
Podcast Summary
In this episode of ProfG Markets, Ed Elson analyzes the recent market volatility triggered by Trump's tariff announcements regarding China. The S&P 500 experienced its worst day since April when Trump threatened massive tariff increases, only to rally when he softened his stance over the weekend. (02:00) The episode explores how markets have become increasingly reactive to presidential statements, with crypto seeing one of its largest liquidation events ever. Luke Kawa from Sherwood News discusses the role of leverage in amplifying market movements, particularly through perpetual futures that now account for 70% of Bitcoin trading volume. The conversation also covers JPMorgan's announcement of a $1.5 trillion "America First" investment initiative and OpenAI's latest multi-billion dollar chip deal with Broadcom.
- Main Theme: Market volatility driven by geopolitical uncertainty, excessive leverage in trading, and the disconnect between AI investment promises and financial reality.
Speakers
Ed Elson
Ed Elson is the host of ProfG Markets, a financial markets podcast that provides analysis of market trends and economic developments. He brings a critical perspective to market analysis, particularly focusing on the intersection of technology, politics, and finance.
Luke Kawa
Luke Kawa serves as the markets editor at Sherwood News, where he covers financial markets and trading trends. He has extensive experience analyzing market behavior and specializes in understanding how leverage and derivatives impact modern trading patterns, particularly in cryptocurrency markets.
Scott Galloway
Scott Galloway is a renowned business professor, author, and entrepreneur who provides commentary on market trends and corporate strategy. He is known for his sharp analysis of technology companies and his ability to identify broader patterns in business and economics.
Key Takeaways
Markets React Violently to Political Rhetoric, Then Quickly Reverse
The episode demonstrates how modern markets have become hypersensitive to political statements, particularly from President Trump. (02:00) When Trump announced potential 100% tariffs on Chinese goods, the S&P 500 fell more than 2% for the first time in six months. However, when he softened his stance over the weekend, markets immediately rebounded with the S&P rising 1.5% on Monday. This pattern, dubbed "TACO" (Trump Always Chickens Out), shows how investors have learned to treat initial aggressive statements as negotiating tactics rather than policy certainties. The key lesson for professionals is to distinguish between political theater and actual policy implementation, avoiding knee-jerk reactions to inflammatory headlines.
Excessive Leverage Is Creating Dangerous Market Cascades
Luke Kawa revealed that perpetual futures now account for 70% of Bitcoin trading volume, introducing massive leverage into what was supposed to be a stable digital asset. (11:00) This leverage can amplify small market movements into major crashes, as seen when a large leveraged short position of over $1 billion was placed just 30 minutes before Trump's tariff announcement. The resulting liquidation cascade wiped out $19 billion in crypto market value overnight. For professionals, this highlights the importance of understanding how leverage can turn small setbacks into catastrophic losses and the need for risk management strategies that account for market structure changes.
Young Investors Are Treating Markets Like Casinos
The episode reveals how Gen Z and younger millennials approach investing with a casino mentality, seeking asymmetric bets where they can "risk it all for 200-400%" returns. (14:00) This generation has only known bull markets, with the S&P 500 taking a maximum of six months to reach new all-time highs since 2013 (except for two brief periods). This has created a Pavlovian response where young investors automatically "buy the dip" using high-risk instruments like short-term options and leveraged products. The implication for seasoned professionals is that market dynamics are increasingly influenced by participants who have never experienced prolonged bear markets, potentially creating more volatile and irrational market behavior.
Corporate "America First" Investments May Be More Political Than Commercial
JPMorgan's announcement of a $1.5 trillion investment in "critical American industries" raised questions about whether major corporations are using large investment announcements to curry political favor. (22:37) Scott Galloway noted that historically, investments in strategically important technologies (like GPS, the internet, and vaccines) have been poor commercial investments initially, which is why governments typically fund them. The pattern of tech CEOs making large "American investment" announcements after political gestures suggests these may be branding exercises rather than purely commercial decisions. Professionals should be skeptical of corporate announcements that seem politically motivated and focus on actual business fundamentals rather than headline-grabbing initiatives.
AI Investment Promises Are Disconnected From Financial Reality
OpenAI's compute commitments now exceed $1.2 trillion, which is five times what all of big tech plans to spend on capital expenditures this year and 90 times larger than OpenAI's projected $13 billion in annual revenue. (29:08) The episode highlighted how vague announcements and investor speculation are creating a bubble of unrealistic expectations. Broadcom's stock jumped 20% based on an incorrectly assumed partnership with OpenAI, and even when that assumption was proven wrong, the stock continued rising on a new actual deal announcement. This demonstrates how the AI sector is driven more by promises and speculation than by solid financial metrics, suggesting professionals should approach AI investments with extreme caution and focus on companies with proven revenue streams rather than ambitious promises.
Statistics & Facts
- Perpetual futures account for 70% of all Bitcoin trading volume in 2025, according to Luke Kawa. (13:40) This statistic reveals how the cryptocurrency market has become dominated by leveraged trading instruments, making it more volatile and susceptible to cascade liquidations.
- 43% of millennials use paid time off to stay in bed and catch up on sleep, as mentioned in the opening segment. (00:28) This reflects changing work-life balance priorities among younger professionals.
- Since 2013, the S&P 500 has taken a maximum of six months to reach new all-time highs, except for two periods: the China/oil crisis of 2015-2016 and the inflation period of 2022. (16:02) This context explains why younger investors have developed a "buy the dip" mentality having never experienced prolonged bear markets.
