Today’s Market with Stephanie Link – Part I 

Five Things You Should Know

1. Equity Markets – rebounded this week with U.S. stocks (S&P 500) up 5.72% and international stocks (EAFE) up 5.29%. 
2. Fixed Income Markets – were down this week with investment grade bonds (AGG) down –2.45% and high yield bonds (JNK) down –0.06%. 
3. Some Tariffs Paused – Global markets endured another volatile week following President Trump’s announcement on Wednesday that planned tariffs would be paused for 90 days on dozens of countries. On the other hand, tariffs on China were raised even further to 125%, isolating the country as a primary target of the President’s trade aggression. It is still unknown what the extent of retaliatory measures will look like as investors look to navigate the uncertainty around global trade. 
4. Fed on Pause – Fed minutes released this week suggested the Federal Reserve is prepared to hold interest rates unchanged for as long as necessary to minimize tariff-induced inflation risk and are publicly ruling out cuts that would act as an insurance policy against a slowing economy. Rate cut expectations have shifted dramatically in the previous week, with consensus expectations sitting at 3 to 4 rate cuts before year end. 
5. Key Insight – [VIDEO] We were fortunate to have Stephane Link with us last Thursday as the tariff news roiled markets in real-time. In Part I, we get to hear her initial thoughts on the news and what may lie ahead. [ARTICLE] We look at some recent takes from top analysts, share three key historical facts to keep in mind around market volatility and point out a potential positive based on recent market action that could signal the beginning to a bottoming process.

Insights for Investors

By Tim Mitrovich

Today’s Market with Stephanie Link – Part I 

Markets clearly were disappointed by the final unveiling of the tariffs, with many calling it a near worst-case announcement. However, there are some important caveats, as well as the fact that worst-case for tariffs does not necessarily equate to worst-case for the economy or markets. Companies are very resilient and once the rules are set, very adept at navigating the landscape back to profitability, especially if there is a break soon in negotiations with some key countries as appears to be the case given the major announcement Wednesday by President Trump to suspend the enforcement of the tariffs other than for China which led to a violent market rally. 

Key Takes 

Tom Essaye had this important take we wanted to share post-announcement on whether the tariffs were a “bearish gamechanger.” His take is that “From a positioning standpoint, the tariff announcements are worse than feared but at this point I do not believe they are a bearish gamechanger. I say that for two reasons: First, the administration implied that these tariffs are a ceiling and they are open to negotiation for global tariff reduction, so it remains a possibility in the coming months global tariffs are reduced. Second, there were important exemptions including all USMCA compliant goods, chips from Taiwan and drugs (pharmaceuticals) from Europe. Those are major import categories and will help to soften the blow from these tariffs.” (Sevens Report, 4/3/25) 

Neil Dutta of Renaissance Macro was less sanguine but not overly bearish. He did take the stand to say, “We are going into a recession. I don’t think it is especially controversial to say so. 

I suspect it will be relatively brief, but that the recovery off the lows will be pretty sluggish.” (RenMac, 4/9/25)  

However, he did seek to calm some of the worries caused by the disruption this week in the bonds market and rise in rates stating, “The rise in bond yields is not really about foreign selling. If the Chinese want to avoid the “embarrassment” of devaluation, they need to hold onto their reserves. The rise in bond yields seems to be mostly about investors facing margin calls, looking to sell high-quality assets to raise cash. This is the conclusion of the BoE.” (RenMac, 4/9/25) 

This view was echoed by Nicolas Oudin of Gavekal, who shared his take on recent volatility saying one “possible explanation is that some important financial market participant—a large hedge fund? A broker-dealer? An investment bank?—has found itself severely wrong-footed by the past week’s moves. I am partial to this explanation, as the markets “seem” to be behaving as if someone is being forced to cover positions. Could the trades be the work of a risk manager rather than of a risk taker?” (Gavekal, 4/9/25) 

In short, while many are trying to find yet another reason to panic, the evidence to date was already suggesting that would be unwise even before Wednesday’s announcement. 

By no means to we think this is the end of the issue, and Thursday’s pullback shows, but it has provided a great opportunity to make some strategic portfolio changes we’ve been waiting to make, and regardless history has shown time and time again (as it did this week) that markets move much faster than anyone can predict and that the best of days are usually far closer to the dark days than anyone could imagine in the midst of volatility.  

The extreme moves in both directions which tend to cluster (see point/chart #2 below) notoriously suck investors in and scare them out in equal measures leaving them as beat up as a piece of drift wood being beat against the shore by waves. The key is to know that while uncommon, such market action is not unusual, and just needs to be endured. 

Key Historical and Current Reasons for Optimism 

When markets fall, investors’ “fight or flight” response gets triggered and emotions run HIGH. That is all perfectly natural and understandable … it’s just not helpful to being a successful investor. 

These emotions almost always manifest with investors fearing the worst and embracing the belief that the losses will never stop. 

The truth is something quite different… 

Consider the following three key points: 

1. Since 1980 the SPX traded higher after a market correction of 10% or more on average, 13.1% 3 months later and 30% a year later. (see accompanying chart) 

2. The best market days tend to cluster right up alongside the worst, making timing the market or waiting for the all-clear impossible. (see accompanying chart) 

3. Missing those “best days” crushes one’s performance, as GS notes, “Since 1990, missing just the 10 best trading days each year would have turned the S&P 500’s positive returns of +15.1% into annual losses of -18.0% on average.” (see accompanying chart) 

One other key development we are watching is the market is not falling at all, or at the least not as dramatically on additional “bad news.” For example, Wednesday had little to no response to the announcement of heightened tariff levels out of China. 

Why is this important? 

One other key development we are watching is the market is not falling at all, or at the least not as dramatically on additional “bad news.” For example, Wednesday had little to no response to the announcement of heightened tariff levels out of China. 

Why is this important? 

When a market begins to either fall less or even rise on “bad news” it is usually a signal that a bottoming process has begun. 

Now that said it is critical from a mindset standpoint to remember the tops and bottoms in markets are processes not points. And so do not be surprised by more potential downside, but if this pattern continues it likely signals the bottoming process is in fact underway. 

The team and I want to thank so many of you for all the well wishes, support and introductions to friends and colleagues we’ve received during this time. All those votes of confidence mean the world to us and continue to motivate us to bring our best each day. 

Have a wonderful weekend and reach out anytime! 

Best, 

Tim 

Data, Just the Data

• U.S. Jobless Claims – initial claims rose by 4,000 last week to a total of 223,00 and in-line with expectations. Continuing claims fell by 43,000 for a total of 1.85 million in the last week of March and well below expectations.  

• Euro Area Retail Sales – rose 2.3% year-over-year in February, exceeding market expectations of 1.8%.  

• U.S. CPI – the annual inflation rate in the U.S. eased to 2.4% in March from 2.8% the prior month. On a month-over-month basis CPI fell 0.1% vs expectations of a 0.1% increase.