Put two mercury personalities in the room, add a large dose of competing goals and media pressure, what do you get? Let’s say that the saga from famous friends to enemies is not too surprising.
Elon Musk and Donald Trump are polarized numbers that tend to drop verbal bombs, which was especially obvious this week as the two were holding back against big beautiful bills, electric vehicle credits and debt.
But given how closely Musk and Trump have worked together over the past year, the cleft can be a shock.
Musk helped elect hundreds of millions of people as president, and Trump rewarded Musk for his government’s efficiency, or for his famous role in his administration as head of the Doge Department. Trump even held a Tesla showroom on the White House lawn to support masks after mask political activities caused a drop in Tesla sales.
One person who was at least not surprised by the famous dust was veteran hedge fund manager Doug Cass. In December, Kass chose to break up as one of the top 15 surprises of 2025.
It was far from Kass’ only correct prediction. He also predicted that the stock market could fall 15% over the S&P 500, and in April accurately predicted that the stock would find foothold after a brutal sale.
Kass recently revisited his views on Musk and Trump. His S&P 500 outlook may disappoint many, but his views on Trump and Musk may be the most surprising.
Doug Cass, manager of the hedge fund, predicted that Elon Musk’s relationship with President Donald Trump would be sour. Kass updated his outlook on the S&P 500 after a high-profile spat between Mercurial Leaders.image Source & Colon. thestreet
After earning 20% 20% profits on the 2023 and 2024 S&P 500, including last year’s impressive 24% returns, investors may have been expecting more fun in 2025.
Then reality began. The stock market was whipped amid a series of shocks. Many arrived via President Trump and Elon Musk through his famous and highly provocative cost reductions.
The stocks definitely deserve perfect for 2025. Optimism about friendly Federal Reserve changes in monetary policy has driven a major return last year to the AI flood that spends interest rate cuts and artificial intelligence, pushing the S&P 500’s price-to-return rate north of 22.
Historically, returns following a high P/E ratio have largely not been shining. That point wasn’t lost in Kass, who correctly said in December that the S&P 500 could drop by 15% in 2025.
Stock tends to produce inactive returns the following year with an S&P 500 P/E ratio exceeding 20.Image Source & Colon. thestreet
“Surprise #9: In 2025, the S&P index will fall by around 15%. The technology-equipped NASDAQ will fall by over 20%.” I wrote Kass.
Kass continued to beat bear drums until February after the S&P 500 hit a record high. Benchmark indexes plummeted from mid-February to early April, bombs in the form of unemployment caused by President Trump and Musk’s Doge’s efforts. At its worst, the S&P 500 fell 19%, while the tech-heavy Nasdaq fell about 24%.
The sharp drop was painful, and many people were worried that an infinite stream of uncertainty would cause even greater losses. However, Kass will correctly reverse the course and buy negotiations with indexes and technical leaders, including Amazon near Amazon.
Since then, Trump has paused on the possibility of trade transactions that facilitate tariffs and tariff bites, increasing the S&P 500 by 20%, driving a dramatic recovery.
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The result has become a nauseating roller coaster ride for purchase and retention investors.
That’s especially true for Tesla (TSLA)) Shareholder. EV came together after Trump’s election amid the hope that Musk’s White House links pave the way for sales growth. Instead, the efforts of Musk’s doge, and undoubtedly controversial political comments, have led to a massive departure of left-leaning Tesla buyers.
It is sold in major markets including Europe and California, the largest automotive markets in the United States. In Europe, Tesla sales fell 49% year-on-year to 7,261 units in April, according to the European Association of Auto Manufacturers. In California, Tesla registrations fell 21.5% year-on-year in the first quarter, while non-Tesla electric vehicle (EV) registrations rose 14%.
As a result, Tesla’s stock price became a hammer, down 54% from mid-December to early April. It then recovered alongside a wide range of markets, jumping 35% mainly in the news, with Elon Musk leaving Doge.
Doug Cass saw one or two things. His career dates back to the 1970s at Money Manager Putnam, including Stint as Research Director for Billionaire Leon Cooperman’s Omega Advisor.
His deep experience means navigating the market professionally. It means he had a front row seat for his share of political, economic and stock market surprises. He witnessed Richard Nixon’s Watergate explosion, the inflation-filled ’70s, the savings and loan crisis, the internet boom and bust, the hanging chad, the housing bubble-driven major financial recession, President Trump’s Presidential Edition 1.0, Covid, and the recent inflation shock and recovery.
Every December, he tests the experience on his “Surprise” list for next year. In addition to predicting the sale of the S&P 500 this year, he is also predicting an unfriendly end to Trump Mask relations.
“Surprise #2: The ‘other’ romance between Trump/Musk should not pass spring 2025,” writes Kass. “National protests and demonstrations emerge and demand from a wide array of members of both Republican and Democrats (including conservatives and liberals).
Kass’ Musk predictions are a longer read, but the point is simple. Musk and Trump will suffer from fallout. This can affect investors. He revisited his outlook and offered a new perspective on the situation of Trump’s monster.
“It is clear that in front of our eyes, both parties can easily purchase an influential political position (and that certainly includes the presidency),” Kass writes. “We don’t even know where the performance will end. Ultimately (probably earlier than later) – like the president’s opening salvos, the two actors probably have deterrents (and kissing and make-up), and that musk and Trump know where their bread is buttered.”
The potential “relieving” of tensions is welcomed given that long-term unbearing promotes market volatility. Still, Kass’ views on what will happen in the next stock market are unencouraging.
“My investment career has not been very common in social, political, geopolitical, economic, interest rates and fiscal policy outcomes (many of which are disadvantaged), so I don’t understand the Uber trust expressed by Perma Bull Cabal (led by Fundstrat’s Tom Lee). “At a 22x forward PE, the stock remains overvalued and after covering yesterday’s index shorts, I plan to rehort Larry.”
If Kass is correct, how low is it by instability forcing stocks, and when could things improve?
“We’re looking at seven lean months in our market. We estimate the negative side risk to be roughly triple upside reward,” Kass concludes.
