0:00
despite threats of a black Monday fueled
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by fear-mongering headlines the S&P 500
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surged yesterday from the session lows
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to the highs it climbed over 6% one of
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the most significant single day gains in
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its history comparable to those seen in
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2020 during the COVID crisis or back in
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2008 during the great financial crisis
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but there's more we were promised
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darkness yet volatility plummeted the
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VIX index as you can see dropped nearly
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50% falling from the 60 level down to
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the 38 to 40 range however those weren't
0:41
the most attention-grabbing facts for me
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what stood out was this first mid
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session yesterday Donald Trump announced
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an additional 50 percentage point
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increase in tariffs on China in response
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to hikes by the Chinese government the
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S&P 500 initially reacted with about a
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2% drop but then recovered closed near
1:02
its highs and is climbing again today
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what does this suggest perhaps tariff
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headlines have already inflicted their
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maximum damage maybe they can't hurt
1:14
much more but there's an even more
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significant development in my opinion
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the yield on the 10-year US Treasury
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bond we saw the 10-year yield break
1:24
below that crucial 4.1% support level
1:27
last Friday only to reclaim it yesterday
1:31
so what comes next to answer this let's
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first examine the dominant narrative and
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compare it to reality what is the
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dominant narrative it's that the US and
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global economies have roughly a 60%
1:44
probability of entering a recession
1:46
that's the prevailing story look at
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Larry Frink CEO of Black Rockck someone
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with deep financial market knowledge he
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mentions that when meeting with CEOs
1:57
most believe the US economy is likely
2:00
already in recession that's the dominant
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narrative what about the stock market
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narrative that we have officially
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entered a bare market that's the story
2:09
being told all right and where else does
2:12
this narrative lead as you know in
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recent days we've heard the US commerce
2:17
secretary and other administration
2:18
officials insist that Trump will not
2:21
negotiate naturally this generates
2:26
okay before contrasting this narrative
2:29
with reality I'd like you to consider
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this feels like a crash prefabricated by
2:36
Donald Trump to force the Chinese to
2:39
negotiate it's a way of telling them
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he'll halt their exports and isn't
2:43
afraid of a market crash or even a
2:45
recession it's a massive bluff plain and
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simple all right let's fit the dominant
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narrative into this framework larry
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Frink and many CEOs claim the economy is
2:57
in recession is there data to support
2:59
this well I don't see any signs that the
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US economy has entered a recession none
3:05
for example if you look at the Baltic
3:08
Dry Index which measures the cost of
3:10
transporting dry bulk goods by sea you
3:13
can see on the chart that it rose in
3:15
recent weeks you might argue well it
3:18
rose recently because more goods were
3:20
shipped out of fear of tariffs i accept
3:23
that and now it's falling fine but
3:26
notice it remains clearly above the 2020
3:29
lows when supply chains were paralyzed
3:32
see it's practically at similar levels
3:34
to 1 2 or 3 months ago before this
3:38
escalation countering this dominant
3:40
narrative we also have the behavior of
3:43
the 10-year US Treasury yield as you can
3:49
4.1% it looks like a false breakdown to
3:51
the downside what does this indicate i
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believe many people capitulated sold
3:57
treasuries the support broke stops were
4:00
triggered more selling occurred and now
4:03
it has recovered above that level
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therefore I don't see signs of the
4:07
global or US economy entering recession
4:10
so in my opinion the dominant narrative
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isn't accurate okay next point the
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dominant narrative says we are
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officially in a bare market well what
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typically happens after a bare market is
4:25
declared i can tell you that one year
4:27
later the S&P 500 has historically
4:31
recovered at least 20% with only three
4:34
exceptions since the end of World War II
4:38
1973 1987 and 2008 therefore the
4:43
probabilities favor stocks rising even
4:45
after an official bare market
4:47
declaration it's not unusual especially
4:50
in this case because this market decline
4:53
this feeling of a sharp drop seems to be
4:56
a crash prefabricated by Donald Trump
5:00
not driven by the natural business cycle
5:03
all right consequently I believe it's
5:07
most likely that within a month 3 months
5:10
6 months and a year from now the S&P 500
5:14
will be above current levels next issue
5:18
regarding the narrative Trump seems
5:20
intent on imposing during this
5:22
prefabricated crisis when US
5:25
administration officials appear they all
5:27
say "No no the president won't
5:29
negotiate." Well that's false he is
5:33
already negotiating look specifically at
5:36
this tweet from the US Treasury
5:37
Secretary a highlevel Japanese
5:40
government delegation is heading to the
5:42
US to negotiate the European Union under
5:45
Fondonder Lion has already capitulated
5:48
offering zero tariffs the amusing part
5:52
is the Spanish government claiming here
5:54
that EU revenue from US tariffs will
5:57
fund sectors in crisis but my goodness
6:00
if tariffs are going to zero where will
6:03
the money come from see this is a
6:06
fabricated narrative everyone is trying
6:08
to profit from okay the UK is
6:12
negotiating india and Vietnam have
6:15
indicated they will lower barriers but
6:18
what catches my attention most is China
6:20
in yesterday's tweet where friend Trump
6:23
tells the Chinese he'll increase tariffs
6:25
by 50 percentage points on April 9th
6:28
unless they back down and reduce the
6:30
retaliatory tariffs they imposed on the
6:32
US he also says that if they don't back
6:35
down negotiations are over if
6:38
negotiations are over why are you
6:41
negotiating all right so what about the
6:44
S&P 500 now the question we're all
6:47
asking is have we seen the worst has a
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bottom been formed i'll tell you what I
6:52
really think which is consistent with
6:54
what I've been saying we are in a moment
6:56
of very high volatility around 40%
7:00
there's a tremendous amount of noise
7:02
okay this market environment is only
7:04
suitable for highly skilled intraday
7:06
speculators claiming a bottom has formed
7:09
nobody knows for sure the key isn't
7:11
whether a bottom is in the key is how I
7:13
react to the S&P 500's movements
7:15
considering the damage inflicted on the
7:17
indices even if it's from a
7:18
prefabricated crash typically indices
7:21
mark a low during peak fear then bounce
7:24
move sideways and develop a
7:25
consolidation pattern the duration of
7:28
which often corresponds to the extent of
7:30
the damage caused however the feeling
7:32
now is that the worst might actually be
7:35
behind us for one simple reason when the
7:39
US specifically Donald Trump yesterday
7:42
announced the potential tariff hike of
7:44
50 percentage points on China the S&P
7:48
500 reacted with gains okay therefore
7:51
I'm inclined to think that we have
7:53
likely seen the lows now you might ask
7:56
is there a bottoming pattern i repeat
7:59
what I said when I considered the bottom
8:02
5,500 there is no bottoming pattern yet
8:06
okay the most probable scenario is a
8:09
sideways movement next point the 10-year
8:13
US Treasury yield the yield settling
8:16
above 4.1% makes it very difficult for a
8:19
recession to take hold is that clear
8:22
finally we've seen the strong rally of
8:23
the Swiss Frank against the dollar euro
8:26
and pound stall and begin to correct
8:28
this leads me to believe that a bottom
8:30
is likely forming around this area but I
8:33
repeat there is no confirmed bottoming
