Loading: The "J-Hook" Recovery

Hey there, my friend. We are back in the saddle for another email after being MIA. My excuse is that my nights over the last couple of weeks were spent getting everything ready for our wedding (let’s be honest, helping my wife get things ready).

The day was awesome and the honeymoon to Jackson Hole was great. Highly recommended!

To help snap me back to reality though, the market decided to start causing havoc. To combat all the bad news you have seen over the last two weeks, today’s piece is going to try and frame all the red as potentially positive.

Quote

“The stock market is never obvious. It is designed to fool most of the people, most of the time, especially during periods of great uncertainty." - Seth Klarman

The “J Hook” Market

It has been a blood bath in the market the last couple of weeks.

At the time of writing this the S&P 500 is down nearly 10% and the NASDAQ 100 is 13% off highs.

While everyone is crying wolf, and saying how “this time is different” (hint-it’s probably not) I wanted to recap an interesting bullish take.

The full podcast is linked below, but earlier this week I listened to the “What Are Your Thoughts” show with Josh Brown and Michael Batnick. Josh had a hot take on what might be going on with the US economy and figured it deserved its own write up.

Let’s dive into how Argentina’s restructuring could be setting an example for the US and discuss the potential J-Hook market recovery.

Argentina’s Chainsaw

Unknown to most, Argentina recently went through an economic restructuring that has some similarities to what is going on under the new US administration. In 2024, Argentina President Javier Milei kicked off a campaign that included several budget cuts, removed a number of government agencies (sound familiar?), cut taxes, and created more of a free market economy in Argentina.

His “mascot” during all this was a chainsaw that became of symbol of spending cuts and reducing government regulation.

It’s important to note that Elon and Javier are close friends, improving the chances that Elon is using Argentina as a model for what he is doing with the “Department of Government Efficiency.”

So how did Argentina fare after these changes?

The initial impact hurt, but now Argentina is experiencing economic progress and is arguably in the upward swing of the “J-Hook.” Rumor on the street is we could currently be dealing with the bottom of the “J” before seeing this larger push higher.

If interested, here is an article further explaining Argentina’s restructuring and Elon’s Relationship with Milei.

Similarities and Differences

So does this theory correlate to what is happening in the United States? Since I’m not an expert on government policy I asked Grok AI to help summarize the similarities and differences (AI is pretty handy folks).

Per Grok: Similarities

• Policy Shock: Both Argentina’s restructuring and Trump’s agenda involve market-disrupting moves—deregulation, fiscal adjustments, and trade policy shifts (tariffs).

• Initial Pain: Argentina’s GDP drop mirrors the U.S. market’s current decline, potentially signaling a necessary adjustment before growth resumes.

• Optimism for Recovery: Milei’s reforms eventually spurred export-led growth; Trump’s policies (ex "Drill, baby, drill" and tax cuts) could similarly boost U.S. economy and lead to a rebound.

Per Grok: Differences

• Scale and Context: Argentina faced hyperinflation and a near-collapsed economy. The U.S., while softening, isn’t in a comparable crisis.

• Tools and Timing: Argentina’s recovery hinged on rapid deficit elimination and devaluation, executed in months. U.S. policy changes (tariffs, spending cuts via the Department of Government Efficiency) are slower-moving and less coordinated, with effects likely delayed into late 2025 or 2026.

• Global Role: The U.S. dollar’s reserve status and Wall Street’s global influence mean its selloff has broader spillovers, unlike Argentina’s more isolated recovery.

Thanks, professor Grok.

Conclusion

So while it is not a perfect fit, the restructuring actions of Argentina’s government and the United States do have some correlation.

Long story short, this is a bullish take that suggests the market is undergoing a temporary pullback in preparation for a move higher. Does anyone know if this is actually the case? No.

As I’ve said before, I’m not a fan of trying to predict the market. Among all the negativity and red days, I figured it was worth providing a bullish case as a reminder that things may not be as bad as they seem.

Stay strong out there. ~ Cade

Cade’s Picks

S*** Just Got Real - Here is the podcast episode of What Are Your Thoughts where Josh does a great job of breaking down the Argentina restructuring and the J-Hook pattern. You can skip to 16:49 in the video if you just want to listen to the part that relates to this post.

Never Root For a Recession - Great write up by Nick on the other factors that often accompany a recession. While down stock prices are cool, this post is a good reminder that not everything in real life will be sunshine and rainbows. Especially if you lose your job.

Prepare For An Adjustment Period - Want more good news? Here is a video that positively covers current market conditions and the uncertainty around tariffs. Personally, I agree with this take and don’t think tariffs will be a long term issue. Don’t take my word for it though, give this a watch.

Best Memes

The market going down is never fun, but it makes for A+ memes. Let’s laugh through the pain.

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Nothing in this email is intended to serve as financial advice. Do your own research. Thanks for reading, if you have any questions, comments, suggestions, etc. about the email don’t hesitate to send me a reply.