An Economic Tsunami Is Coming

There are clouds on the economic horizon that could impact markets for years to come:

• Treasury yields are rising, and ratings agencies have downgraded U.S. debt

• Student loan repayments and loan delinquencies have started, sucking billions of dollars from the economy and cratering the credit score of millions of borrowers

• Tariffs are increasing the cost of nearly every product in the U.S.

• Layoffs are rising, and new job openings are falling

• AI continues to threaten white collar and entry-level employment long-term

It’s an economic stew that could break markets.

To be clear, I’m not changing my monthly investments or the companies in the Asymmetric Portfolio, but I do want to be aware of risks that face the companies I own and the economy that’s the context with which all markets operate.

Below, I’ll get to what I’m watching and some data that may make you think twice about overpaying for a hyped stock.

The Asymmetric Portfolio continues to be solid, and gains are holding after earnings season. Gains have been concentrated among a few big winners — as I would expect given my style of investing — with the top three holdings up 186%, 132%, and 181% respectively.

In Case You Missed It

Here’s some of the content I put out this week.

• Autonomous Vehicles Are Having an Incredible Week: Waymo is expanding, Mobileye is making deals, and Tesla says it will launch on June 12.

• Joby Aviation and an Intro to Manifest Destiny Investing: Joby raised $250 million this week, and it extends the company’s runway, increasing the likelihood of a positive outcome for investors.

• Ranking the Mag 7: In this video, I ranked the Mag 7 stocks from 1 to 7.

Economic Clouds Are Building

Earlier this year, I shorted Tesla in part because I thought the market was overvalued and economic conditions were likely to worsen, which would hurt auto sales. The position was incredibly successful, closing with a 260% gain, but that was more of a testament to Tesla’s collapse than it was the overall economy going south.

As summer begins, I’m seeing some of the same signs of weakness in areas the market seems to be overlooking in the current move higher. As I mentioned, this won’t change my monthly buys in the Asymmetric Portfolio, but I am on the lookout for another special situation to hedge the portfolio in the case of a large correction.

Here are the warnings I’m looking at:

Yields Are Up

The bond market is 10x bigger than the stock market, so when the bond market freaks out, we should all pay attention.

10-year yields have been flat-ish for over a year, but the context with which they have risen over the past year is concerning. Inflation was under control and the economy was slowing, which would usually lead to rate cuts, but tariffs threw a wrench in that, and now even long-dated yields are rising because the market thinks U.S. debt is riskier than it once was.

Look out to 30-year treasuries, and the rising price of U.S. government debt is shocking.

Higher yields make it more expensive for the government to borrow money to fund tax cuts and increased spending, aka deficits. And it also makes it more expensive for corporations to get debt.

Student Loans Could Be a Big Problem

In October 2023, student loan repayments began, but involuntary collections on defaulted borrowers didn’t start until May 5, 2025, after a more than five-year grace period. This impacts about 5 million borrowers who haven’t made a monthly payment in at least a year.

According to the Department of Education, 42.7 million borrowers owe $1.6 trillion in student loan debt. And defaults will impact everything from discretionary spending to home purchases.

Student loans have been a cloud hanging over the economy for more than five years, and the impact of repayments beginning will start to hit the economy soon.

Tariffs and Uncertainty

Tariffs have been the talk of the market for nearly two months, but they haven’t really impacted day-to-day life for most of us.

Retailers have put off price increases as long as they could, but we’re going to see prices go up, and just yesterday, my wife sent me this. For perspective, a Nuna Rava sold for $450 a few months ago, and now it’s $700!!

A lot of products are going to go up in price because of tariffs. That’s going to have downstream economic impacts that will take many months, if not years, to fully flow through the economy.

Don’t think Liberation Day’s tariff announcements on April 2, 2025, have been felt by consumers. The price increases have only recently started to hit store shelves, and with tariffs now in legal limbo, no one in the supply chain is going to take a chance that tariff cuts are coming and prices are going up on lots of things we buy.

Layoffs and Job Openings

It’s anecdotal, but I’m hearing more about (quiet) layoffs, and those workers who got laid off or took buyouts are having a hard time finding work. The data looks like it supports that trend.

You can see that job openings have plunged since the start of 2022.

On an absolute basis, we’re back to the level of job openings as in 2019, but the trend doesn’t look good.

I’m not sure we would see these “quiet layoffs” or buyouts in this chart, but the official layoff data isn’t trending in the right direction.

And the culprit of all of the above may be the same technology that so many investors are excited about.

Is AI Eating the Economy?

The AI doomers have been vocal for years about the negative economic and societal impact of AI, and it’s hard to know what’s real and what’s not. Are jobs really at risk from AI replacing us?

I want to at least listen to the people who should know what’s coming, and Anthropic’s CEO, Dario Amodei, has an important perspective given his leadership of one of the top AI model makers. And he is warning about mass unemployment.

He’s not the only one. There are whispers about companies needing fewer workers as AI does jobs people once did.

If there’s mass unemployment, it wouldn’t start with Google’s engineers being laid off. It would start with new jobs not opening up in the first place.

Entry-level jobs would be hit first.

What do we see in the data? This chart was a little jarring when I first saw it. And 9.6% of men 20-24 are unemployed, up from 6.7% a year ago.

Zoom out further, and a rise in the 20-24 unemployment rate is usually a precursor to a recession.

My Twitter friend QE Infinity posted this gem. There’s never been a time in the last 30 years when new grads had a higher unemployment rate than the national average. Why? New grads are cheap compared to someone with 20 years of experience.

Is this trend because of AI? Lower opex budgets as companies “get lean”?

I don’t know, but if it continues, the impact on the economy could be profound.

These are all inputs to consider as an investor, and I’m thinking about them hard as I look for opportunities in the market.

Disclaimer: Asymmetric Investing provides analysis and research but DOES NOT provide individual financial advice. Travis Hoium may have a position in some of the stocks mentioned. All content is for informational purposes only. Asymmetric Investing is not a registered investment, legal, or tax advisor, or a broker/dealer. Trading any asset involves risk and could result in significant capital losses. Please do your research before acquiring stocks.