Trump’s Criticism Impacts Markets and Alphabet’s Future Prospects

President Donald Trump is intensifying his critique of Federal Reserve Chair Jerome Powell, creating unease in the markets and adversely affecting tech giant Alphabet Inc GOOGGOOGL.

However, this situation may present opportunities for enterprising traders looking to capitalize on the volatility.

It’s important not to overlook the anxiety stemming from the recent shifts in financial sentiment. In a post on Truth Social, Trump expressed his dissatisfaction with Powell, stating, “Jerome Powell is always too late and wrong. His termination cannot come fast enough.”

Powell, who was nominated by Trump in 2017 and subsequently reappointed by President Joe Biden in 2022, has a term that extends until May 2026. Importantly, U.S. presidents lack the authority to dismiss a Fed chair prematurely.

The crux of Trump’s criticism revolves around the benchmark interest rate, as he has rebuked Powell for failing to lower borrowing costs even as oil prices decline and inflation worries ease. Trump further indicated, during an appearance alongside Italian Prime Minister Giorgia Meloni, that he could expedite Powell’s removal if he desired.

Beyond the political theatrics, there is a more pressing concern: the administration’s economic strategies, particularly the imposition of tariffs on key trading partners, could push the nation toward a recession, potentially impacting the economy this year. For Alphabet, which relies heavily on advertising revenue, a downturn could pose significant challenges, contributing to its stock’s volatility.

Potential for Quick Gains in Alphabet Stock

Trump’s approach to tariffs has been a staple of his campaign narrative, framing them as essential for securing favorable trade agreements. This perception is vital for Alphabet’s market analysis: the company has a strong track record, and top performers typically rebound quickly from temporary setbacks.

That said, Alphabet faces scrutiny amid a 22% decline in stock value this year. This pessimism often arises from traditional analysis frameworks, both technical and fundamental, which rely on time-based signals. Such analyses can obscure the broader context of stock price and revenue generation.

Many investors fall prey to the misconception that there is a universally “good” or “bad” stock price, leading to oversimplified conclusions about market entry points.

To navigate this complexity, investors can utilize a method known as abstraction, which condenses continuous events into finite conclusions. I applied a quasi-binary compression to create a modified first-order Markov chain model regarding Alphabet Stock.

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Over the past two months, shares have shown a notable “2-8” sequence: two weeks of gains followed by eight weeks of losses. This pattern is exceptional, having occurred only four times in the past decade. Notably, three out of these instances saw Alphabet’s stock rise sharply within the first two weeks after the signal emerged.

While such an assessment may be viewed as statistically tenuous, market behavior often reflects emotional responses, possibly enhancing the likelihood of a price rebound.

Formulating a Bullish Strategy for Alphabet

With a potential bullish reversal on the horizon and an earnings report forthcoming, aggressive traders might consider a speculative out-of-the-money (OTM) option strategy instead of a conservative hedge. Timing and market dynamics suggest that this could be an opportune moment.

The most reasonably priced vertical spread appears to be the 157.50/160 bull call spread for options expiring on May 2. This entails purchasing the $157.50 call (at an ask of $265) while selling the $160 call (at a bid of $193), yielding a net debit of $72—the maximum potential loss for this trade.

If GOOG Stock surpasses the $160 strike price at expiration, the maximum gain could reach $178, representing a return of over 247%.

While this reflects a speculative setup with limited risk and reward, data shows that in 75% of instances when the 2-8 sequence appears, the median return two weeks later is approximately 13.15%. The upcoming earnings report could bolster the case for a strong performance by Alphabet Stock.

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