Global markets reel from tariff fallout: Stocks, Oil, and Gold plunge, bonds and contra trades surge

• Global Markets under pressure…as the fallout continues.

• Stocks, Oil, Gold and Bitcoin are down.

• Bonds, the VIX and the contra trades are all UP.

• 50 countries come to the table to negotiate – but China remains absent.

• Trump team digs in.

• Try the Escarole & Beans.

Oh boy – I picked the two worst days to be ‘off the grid’……as the markets suffered the worst carnage in years - $5 trillion in US paper price adjustments, and an additional $2 trillion in global price adjustments – I caution using the word loss because it isn’t really a loss unless you make the sale and take it– this after Donny imposed systemwide tariffs on everyone! Some more than others – but in the end it was what it was and the markets (algo’s, traders and investors) responded in kind…..

Some ran for the front door, the side door, the basement door and the garage door – trying to get out before the house burns down….while others see the panic as an opportunity that is still playing out – and I say that – because this story is far from over…..and while the tensions are running high on both sides – You have to ask the question – Was this type of selloff just long overdue? Is this just part of the reaction to the 15 yrs of zero rates, $9 trillion worth of debt, unprecedented spending and lopsided/unfair trade agreements?

While some analysts expected the markets to calm down a bit – after the Thursday beating, that would not be the story – remember – when markets have such a visceral reaction and then close on the lows – it usually suggests that we have further to go…..and go we did…… The instability continued to hit US markets on Friday causing the Dow to lose a stunning 2,231 pts or 5.5%, the S&P gave back 325 pts or 6%, the Nasdaq choked – falling 965 pts or 5.9%, the Russell lost 85 pts or 4.4%, the Transports gave back 462 pts or 3.4%, the Equal Weighted S&P lost 382 pts or 5.7%, while the Mag 7 spiraled out of control – losing 1270 pts or 5.8%. And again – the markets closed on their lows – not a good sign….….

Here is the current state of affairs at 5 am est….

Global markets are under pressure – Asian markets got crushed overnight – Hong Kong lost 13.25%, China down 7%, Japan – 7.8%, Taiwan – 9.7%, South Korea down 5.6% while Australia lost 4.25%. Circuit breakers were triggered in Japan, Taiwan and South Korea.

European markets have just begun to trade and the picture there is not any better….Germany down 6.1% while all of the other market centers are down more than 5% as the day begins… Understand that Europe does not have system wide circuit breakers (like the US)– they have ‘volatility interruptions’ or ‘trading halts’ on individual securities to manage market volatility…. The EU does not have a single circuit breaker policy.

And US futures are not any better – at 5 am – Dow futures are down 3.5%, S&P’s – 4%, Nasdaq -4.25%, Russell -5%, while the Mag 7 appears to be down nearly 5%.

S&P circuit breakers will be triggered if the S&P falls 7% - hitting 4718.89 – markets will close for 15 mins….and then it will get triggered again if we fall another 6% (13% total decline) to 4414.45….again, a 15 mins pause – and while I do not think we will get triggered – you never know how the algo’s will react.

Bonds are surging…the TLT added 1% on Friday and the TLH added 0.75% - taking both those etf’s up better than 6% ytd and likely going higher today. The 2-yr treasury is now yielding 3.53% down 21% off the January high of 4.4% in January. The 10 yr is yielding 3.94% down 19% from it’s January high of 4.8%.

Oil is trading down 4% at $59.50 – now down 22% off the January high of $76.75. Oil is now trading at levels not seen since October 2021 – If it fails to hold here - $55 is the next stop….. Lower oil prices lead to lower gasoline prices, lower transportation costs and lower manufacturing costs…..and that will help ease inflation across the board.

Gold is up 0.3% - at $3,045 – but that is after it lost 5% last Thursday/Friday. And you ask me why? Isn’t gold a ‘safe haven asset’ that should go up when anxiety about a global slowdown or US recession hit the tape? And to that I would say yes – except – Gold has also had a dramatic run +45% in two years, so there is some clear profit taking….and while it is a safe haven asset – it will come under pressure as investors who trade on borrowed money - and there are plenty of them - need to sell gold to meet ‘margin calls’ on their stock portfolios.

The VIX is up another 21% this morning – trading at 55…. gapping higher off the Friday close at 45.31. We are challenging the highs last seen during the August 5th Japanese Carry Trade implosion….that lasted one day…this feels like it’s going to last a bit longer…..And as you can imagine – while stocks are under pressure – the contra trades are winning….the VIXY is now up 62% ytd, the DOG +11%, PSQ +20%, SH +15.75%, the SPXS is +48%.

And the Eco data? Well, Friday’s NFP report was better than expected – we created 228k jobs vs. the 140k expectation and that suggests the economy remains strong…but it didn’t stop the selling…

Today – we don’t have any eco data but Wednesday we will get the latest FOMC mins….where I don’t’ expect to learn anything new, Thursday brings us the March CPI – expected to be slightly weaker while Friday brings us the March PPI which is expected to be slightly higher.

OK – look, now we are going to start hearing about how every analyst on the street is changing their tune…. calling for more downside….in fact – Citibank’s Stu Kaiser tells us that there is still ‘ample space to the downside’. He is suggesting that the ‘worst case’ for tariffs is still not priced in and if we enter a recession – then the market hasn’t fully priced in that either…. Ok great! But what does that say to the long-term investor? What it says is – stay the course…. Make sure your risk score currently reflects your mindset. If the action has caused you undue stress then you may not be properly allocated for the long-term plan. And if you have cash – you should be ready to put it to work in the names that have gotten significantly dislocated – as some investors throw everything out the window – including the kitchen sink.

Now, is this visceral reaction appropriate? Is it overdone or is there more to go? No one knows yet…..and while it could get discounted more, do not forget….Any sense that a tariff deal is close at hand will cause the same visceral reaction to the upside… and even if a deal is still a ways off – at some point – the selling becomes so exhausted that it creates massive long term opportunities – my sense is that we are almost there….realizing that you can never pick the bottom. In the end – all of this continues to create uncertainty, and we all know that the market and investors do not like uncertainty and so we get volatility….and lower prices.

As of today – the WH confirms that 50 countries have reached out to begin tariff negotiations. Over the weekend -we heard from Vietnam – who want to go to zero tariffs, we heard from Taiwan – they want to go to zero tariffs, and so, Trump and his tariffs buddies should say “YES” to this…., they should – TAKE THE WIN….and that will force other countries to come in for the same deal…….…. Like my good friend Tom Hayes says – ‘Sometimes you gotta be willing to take YES for an answer’!

Every one of the 11 S&P sectors is now in negative territory…. with Tech down 21.5%, Consumer Discretionary – 18.5%, Industrial – 10.5%, Communications – 10%, Energy – 8%, Basic Materials – 7.5%, Real Estate down 4.2%, Utilities down 1.5% and Consumer Staples down 0.2%.

Down the line – Homebuilders down 11%, Retail – 18.5%, Airlines – 28%, the Value trade down 9.4%, Growth trade – 17.5%, Semi’s – 27%, Aerospace and Defense – 12.6%, Big Pharma – 2.2%. and the list goes on….

Remember - there is no reason to ‘rush out’ and be an aggressive buyer…. Patience is a virtue, and the recent action has only confirmed that narrative. Earnings start this Friday – with the Banks…..And then Tax Day is the 15th…..

The S&P closed at 5074 – down 325 pts…. taking us thru 3 century marks…..We opened at 5292 – traded down into the 5100’s and then ended the day at 5074. We are just 74 pts away from the April 2023 lows of 5000 – should we pierce that – then that opens the door to S&P 4500/4700. If futures are correct – then at the open – the S&P will be in official Bear Mkt Territory…. joining Nasdaq & Russell.

Escarole and beans

Known in Italian as scarola e fagioli, is a classic dish rooted in the culinary traditions of southern Italy, particularly regions like Campania, Puglia, and Calabria. Its history reflects the resourcefulness of peasant cooking, or cucina povera ("poor kitchen"), where simple, inexpensive ingredients were transformed into hearty, flavorful meals. While exact origins are hard to pinpoint due to its humble, oral-tradition beginnings, the dish likely dates back centuries, tied to the agricultural lifestyle of rural Italy.

For this you need – Olive oil, crushed garlic, escarole, cannelloni beans, vegetable stock, 1 red chili pepper, s&p & a baguette of Italian Bread.

Begin by sautéing the garlic and sliced chili pepper in olive oil. Add in the beans – sauté to let them get hot…no need to ‘cook’ them. Add in 1 cup of veggie stock, bring to a boil and add the chopped escarole. Season with s&p.

Let simmer on the stove.

Next – slice the baguette and toast in the oven or on the stove. Serve in a large bowl and enjoy.