The opinions expressed below are my own and do not necessarily represent those of Visdom Investment Group, LLC.
Rumor mill.
Overseas markets were clobbered. S&P futures were off 3% overnight. The market opened and the S&P rapidly lost more value, the morning low was 15 minutes into trading and the index was down 4.7% for the day, well below the official bear market level of 4915. At that point, the market bounced very strongly and then a tweet sped through the market like a bat out of hell. The tweet stated that Trump was considering a 90-day pause in tariffs for all countries except China. The S&P went up 400-plus points, more than 8% in less than 30 minutes. The tweet was refuted by the White House and called fake news. The market fell back incredibly quickly and somewhat below Friday’s close. We wandered through the remainder of the day about that level. Capital flow was extremely high today, 228%. Yields climbed significantly across the curve.
The range of trading today, thanks to the rumor mill, was the largest percentage since March 13, 2020. That was a session early in the pandemic. Considering that the pandemic was one of the fastest shocks to markets and economies, as well as a period of extremely high uncertainty, should put the last half week into perspective. Whether you agree or not, the market is as worried and as in-the-dark as it was when the pandemic just began. Let that sink in for a moment.
Having seen an 8% intraday bounce, on tariff talk, even though it was fake, should remind us that these are not normal markets. With the specter of tariffs hanging over the markets, investors and robots are on hair-triggers. Right now, the stampede *into* stocks is the outlier possibility. There remains significant chance that equities continue to drop, but this seems to be a process of consistent downward pressure. As markets come to accept tariffs as longer-lived realities, the market drifts lower with the capitulation of various investor groups.
I don’t want to argue that a crash is unlikely but I do want to suggest that the market may be structurally reversed for the foreseeable future. Stocks may now be on an escalator down and an elevator up.
Tariffs are all that matters. You know it. I know it. We’re all just watching the White House for policy shifts and the economic data for the consequences. That said, guess what starts tomorrow?
Earnings season.
Walgreens Boots Alliance kicks off the S&P 500 companies tomorrow morning but it’s doubtful that will matter to the market. JP Morgan and a few other banks announce Friday morning. The results will be lightly regarded. The guidance will be the only thing that investors will want to digest. We can only wait.
In the meantime, hold on to your hat. Tariff talk is the market and the market is tariff talk.
See you tomorrow.
-Mike
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