Stocks Inflate Ahead of Tariff Talks

The stock market has become nearly the most inflated it has ever been in recent investment history ahead of news of tariffs, AI spending, and rate cuts.

Inheriting the generally bullish markets of the Biden economy, President Trump will have to navigate this incredibly volatile economy. Most stocks post-COVID surged beyond sustainable levels, making them overvalued in market cap as compared to their actual tangible value, meaning that their stocks could be at risk. While stocks have remained bullish, many investors have admitted that they fear an impending correction in 2025 as the economic environment shifts.

Without very much government intervention and oversight, as President Trump has prioritized cutting taxes and regulations, companies may begin to act more freely. While we may see stocks surge higher, they may also tumble lower as lower regulation means a much more likely threat of poor business decisions which could pose risk to the markets as a whole.

Now, stocks remain overvalued and are thus possible to correct over the next few months. Nvidia, one of the largest companies by market cap, is valued much higher than it is actually worth, for instance. Particularly in the Nasdaq, especially AI or chipmaking companies, overvaluing is very common. Unfortunately, since these segments of the economy have the highest importance in the future, their correction could mean disaster for the stock market.

However, it is not reasonable to doom just yet. Perhaps lower regulations and tax burdens could allow these companies to pour even more capital into technological development and business growth, improving their market value-assets ratio. Also, these stocks could continue to surge as long as market sentiment is high, earnings reports remain well, and rate cuts are pursued by the Fed.

Most importantly, it is crucial to acknowledge the economy's inflatedness/bloatedness when pursuing economic policy. The Trump administration has prioritized many new radical economic policies which they need to pursue passively to avoid a shock.