Marin Katusa: Tariffs trigger recession red alerts you can’t ignore

April 04, 2025 at 11:35 AM EDT

Reprinted from the Katusa’s Investment Insights newsletter

The first tariff hit like a cannon blast.

During the “Tariff Tantrum” of 2018–2019 — sparked by the U.S. slapping tariffs on steel, aluminum and billions in Chinese goods — global markets braced for economic fallout. Equity indexes wobbled, supply chains scrambled, and headlines warned of gloom. But in chaos, there’s opportunity.

Take Canadian steel giant Stelco—its share price exploded from $11 by the end of 2019 to $50 just under 2 years later. And then an ultimate buyout at $68 for 518% gain. In a short time, investors turned a “tariff tantrum” into a cash windfall. Critics called the surge a fluke; Stelco proved them all wrong.

Now, as fresh tariff chatter resurfaces, the question is simple: Can lightning strike twice? Let’s look at the signals…

The yield curve Tilt-a-Whirl

When short-term rates surge above long-term rates, economists break out the “R-word.” And we saw that last year—both curves dipped deeply into negative territory. Nothing screams “economic trouble ahead” like the 2-year to 10-year Treasury and the 5-year to 30-year yield curves flipping negative—then bouncing back at breakneck speed.

Last year, both curves plunged deeper into inversion territory than they had in decades, rattling top economists. When short-term rates surge above long-term rates, economists break out the “R-word.” Economists typically view yield-curve inversions as an almost sure-fire recession predictor. But here’s the twist: they’ve started popping back up just as fast, creating a “double steepening.”

If you’re confused, you’re not alone. That violent snapback suggests the market can’t decide if a deep recession is imminent or if a so-called “soft landing” might emerge.

Why it matters:

A sudden steepening often hints at shifting investor sentiment—a potential slowdown or stagflation threat.
Bond traders are bracing for rate hikes, cuts, or maybe both in quick succession.

Inflation’s stubborn streak

Let’s ignore the market crashing and volatility for a moment…

Most headlines tout that inflation is “cooling,” but core prices remain well above the Fed’s 2% target. After hitting levels above 5%, inflation rates are hovering around 3–4%—far from the relief many hoped for.
If you think that’s good news, ask the small businesses forced to slash margins or households grappling with higher grocery bills.

Big takeaway:

Stubborn inflation means central banks may keep rates higher for longer, fueling fears of a 1970s-style stagflation scenario.
CEOs and policymakers alike worry that service-sector prices (like healthcare, hospitality) won’t budge, even as consumer confidence plummets.

The sentiment slump below 60

It’s more than a sour mood when the Sentiment Index plunges under 60, it’s a red flag for consumer-driven economies. And since consumer spending accounts for about 70% of U.S. GDP, every point in sentiment packs a punch.

Why it matters:

Nervous consumers mean delayed big-ticket purchases (homes, cars, appliances).
Delays lead to weaker corporate earnings, spooking investors further.

When people lose faith in tomorrow, they tighten wallets today. And that potentially speeds up the very recession they fear.

Gold’s $500 speed run

Some call gold the ultimate snooze-fest—a shiny relic with no yield. Unfortunately for those people, many others have made a fortune in gold and gold stocks in these exact bull market cycles. Myself included.

In a world obsessed with the next big thing and the Mag 7, gold has quietly racked up its fastest (and quietest!) $500 gain in history. In less than a year, it’s done what once took entire market cycles. Past $500 moves dragged on for years—this time, it was just a matter of months.

This is all because of fears of stagflation, banking stress, and shaky currency faith typically push gold prices higher. Investors, institutions, and central banks see gold as “crisis insurance,” and, apparently, they’re stocking up fast.

The path forward

I’ve seen cycles like this before. Each time, the panic-laden headlines overshadow the rare windows of opportunity. With yield curves whipsawing, inflation refusing to cool and consumers in a funk, high-quality defensive assets often thrive.

Pay close attention to these “boring” charts. They might just hold the keys to protecting—and potentially supercharging—your portfolio’s upside.

We just released the April issue of Katusa’s Resource Opportunities … 3 new gold buys were detailed after a deep dive in the gold sector. Click here to learn more about becoming a member.