Weekly Market Bites

end of week markets update

1) Here’s a summary of the markets year-to-date:

2) What a week.

The rollercoaster ride started even before Monday.

Some were already calling it "Black Monday 2.0" by Sunday night.

And while the week ended on a positive note, the markets delivered on the drama.

Volatility has not been this high since Covid and the Great Financial Crisis:

If you were following the markets and news and felt overwhelmed, take comfort in this:

Most financial commentators I follow seemed more hysterical.

(Still deciding if that’s a bullish or bearish signal.)

For example:

The legendary Howard Marks said:

The two most bullish analysts on Wall Street capitulated: 

• Fundstrat’s Tom Lee:

• Wedbush’s Dan Ives:

By midweek, it felt like full-on panic mode.

Alarm bells were going across many corners of the financial system.

And frankly, the data gave enough ammo for anyone who wanted to panic.

Particularly worrying was the combination of:

• A crashing stock market (yes, we lived through an actual crash)

• A falling dollar (usually a safe-haven trade in crises)

• And rising long-term bond yields (which usually fall when things get bad)

The three above were indicating that something was off:

The vibes from the "market pros" were basically:

and this 🤣 

Then as well know, Trump announced a 90-day pause on Wednesday.

Leading to a 9.5% rally in the S&P500.

The best day for stocks since 2008.

15 minutes before making his announcement, Trump posted this on his social media account:

What can I say my friends…

3) How to panic markets and alienate capital…

The U.S. sits at the center of global capital markets. And capital today moves fast.

Right now, markets are speaking.

And I think this captures the vibe:

He’s right, look at Gold 👀 

And the Swiss franc:

4) What are possible scenarios for the S&P500?

It’s gonna come down to how all this affects:

• Corporate earnings (EPS) and

• Valuations (P/E multiple)

As you can see by the chart below from Goldman Sachs there are a wide range of outcomes:

Since the 90-day tariff pause, the S&P has ranged between 5,000 and 5,350. Not yet low enough to place it under the “Recession Scenario” column according to the chart above.

This range suggests the market right now is expecting a slowdown in earnings growth and valuations have taken a hit.

Is a recession priced in or not?

That’s a big part of the tension right now.

5) The stock market is not obvious…

A lot of people I talked to this week are convinced the worst is still ahead.

The logic goes: tariffs just dropped, the real economy hasn’t felt the hit yet, and Trump could tweet us into chaos any minute now.

The seers at Goldman Sachs updated their base case to a recession this week… and then walked it back 73 minutes later.

Not 73 hours. Seventy. Three. Minutes.

So yeah, nobody knows wtf is going to happen.

And most of us are bracing for more bad news. And we may even be right.

But Josh Brown (CEO at Ritholtz Wealth) wrote a post yesterday that’s worth your time. It tackled this simple but tough question:

“Why would I buy stocks before a recession?”

The answer: Because the stock market is forward-looking. It almost always recovers before the economy does.

Just look at the COVID crash in 2020:

Markets bottomed long before earnings turned around:

or GDP growth:

So trying to time the market based on what feels like is coming next is not a great move.

This is something I struggle with a lot myself.

But I try to remind myself of the following, to avoid being impulsive:

• I can’t time the market (because almost no one can)

• If everyone’s panicking, it’s probably a terrible time to sell (it almost always is)

• I’m mostly fully invested in a globally diversified portfolio (Not all-in USA)

• I’ve got some cash on the side, and if things get uglier, I’ll deploy it

charts

How much does an iPhone cost to make? And how much will tariffs raise the price?

What happened to the good old days?

A quick look at the countries America does the most trade with:

Clearly the most important countries / regions are:

• North America: Canada and Mexico

• Europe: EU

• Asia: China, followed by Japan, S. Korea and Vietnam

Trade deals with these countries are the ones that really matter.

And finally, some parting wisdom