Image source: Pixabay

On July 23, 2025 the DJIA closed at 45,010. The 30-year T bond yield closed at 4.94% leaving the DDV of the DJIA at 33,934. The differential between the Price of the DJIA and its Value hit an absolute record of 11,077 points. The most expensive ever as shown below.

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In January, when the newly elected Mr. Trump was banding tariffs around like a drunken sailor, it was time to sell the DJIA and take no prisoners. While most sweeping tariffs have been delayed until August 1, 2025, Mr. Trump seems hell-bent on reimposing them.

In view of this I retain by bearish expectation for the DJIA at 45,010. Tariffs are paid by US importers, either corporations or citizens and not by exporters to the United States. Ether way, tariffs are taxes levied by the US government on its own corporations and people. The earnings of both should both shrink as inflation rises. Higher inflation should push up 30-year T bond yields, eroding further the DJIA Value below its current level of 33,934.

When will the market crack? The big question. As always, it is difficult to predict but the conviction is there as it was in 1987, but it took 10 months for it to happen. Only with the full force of Trump’s tariffs coming in into play in August will we get hard economic data to judge the sate of the nation.

Perhaps the following chart will remind us how 1987 turned the DJIA upside down.

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Once that has taken place, the DJIA Price can return to its historical relationship with its Value which has had a causal correlation coefficient of 0.97 over the past 50 years.

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