0:00
we were anticipating a savage rebound
0:03
and well there you have it the S&P 500
0:07
experienced the largest intraday rally
0:09
in its entire history it was
0:12
spectacular the obvious question today
0:15
is have we found the bottom is the
0:18
correction officially over and will the
0:20
S&P 500 climb from here to answer this
0:24
let's first consider a key development
0:26
we've seen a necessary condition met
0:29
capitulation indeed CTAs have
0:32
capitulated fund managers have
0:34
capitulated and retail investors
0:36
bombarded with disproportionate fear
0:38
have also capitulated this is necessary
0:41
but it's not sufficient to declare a
0:43
market bottom bare markets often feature
0:47
sharp rallies this happens because
0:49
negative gamma and high volatility mean
0:51
that once a bounce starts prices can
0:54
slide upwards towards resistance levels
0:56
easily however this doesn't necessarily
0:59
mean new money is entering the market
1:02
what truly defines whether a bottom is
1:04
in isn't the ferocity of the rally but
1:07
the nature of the subsequent correction
1:10
that's why we must pay close attention
1:11
to any near-term downward movement in
1:14
the S&P 500 and draw conclusions based
1:17
on that my initial take and I offer this
1:20
for critique is that we likely have seen
1:23
the low point but because true V-shaped
1:26
recoveries are rare I believe this low
1:29
is part of a broader bottoming process
1:31
the absolute low might be behind us and
1:34
I think it's now much more probable that
1:36
the worst has passed consequently I
1:39
reiterate what I've mentioned in
1:40
previous analyses i believe that 3
1:43
months 6 months and 12 months from now
1:46
the S&P 500 will likely be trading at
1:48
levels higher than the lows we witnessed
1:51
recently next topic the tariff war
1:55
yesterday Trump took a step announcing a
1:58
90-day suspension of tariffs for
2:00
countries that hadn't
2:02
retaliated the prime example of fumbling
2:04
this was the European Union my goodness
2:08
they don't learn minutes before Trump's
2:11
tweet the EU issued a statement saying
2:13
they would retaliate the EU's handling
2:16
of this is quite something beyond
2:19
suspending tariffs for 90 days what
2:21
caught my attention most was that Trump
2:23
extended an opportunity to Xi Jinping to
2:26
ease the pressure he indicated a
2:29
willingness to lower tariffs on China
2:31
from the current 125% level so what's
2:34
the likely scenario ahead i suspect the
2:37
90-day period will be extended
2:39
negotiating tariffs having worked in
2:42
public finance I can tell you requires
2:44
significant time and discussion
2:46
therefore I anticipate they'll prolong
2:49
this period likely maintaining an
2:51
average tariff increase baseline of
2:52
around 10% they probably won't go below
2:55
that furthermore I believe Xiinping will
2:58
likely make a move to deescalate
3:00
provided we don't see new threats emerge
3:02
from China for example announcements
3:05
intensifying export controls on rare
3:07
earths or forming alliances specifically
3:10
to counter US tariffs if China avoids
3:13
that path it's highly probable we'll see
3:15
a slight reduction in tensions consider
3:18
this if merely announcing a 90-day delay
3:21
triggered such a massive rebound in the
3:23
S&P 500 imagine the market reaction if
3:27
China takes a small step back both sides
3:30
make minor concessions and they announce
3:33
progress towards an agreement it's
3:35
highly likely stocks would rally further
3:38
and remember I've suggested these
3:40
tariffs might not be the worst thing in
3:42
the long run and could even yield
3:45
outcomes moving on to
3:49
bonds yesterday I spoke with a colleague
3:52
who works for a US asset manager
3:54
specializing in the bond market he
3:56
advised not to worry excessively about
3:58
the recent bond moves he explained that
4:01
much of the recent activity stems from
4:03
fund managers unwinding carry trades
4:06
these trades are profitable in low
4:09
volatility environments but the recent
4:11
spike in volatility forces them to close
4:13
out positions importantly he confirmed
4:17
his perspective he wasn't seeing
4:19
evidence of China actively selling bonds
4:23
so we can likely remain calm on that
4:25
front for now correspondingly the
4:27
Chinese UN was practically unchanged in
4:30
yesterday's session regarding Bitcoin
4:33
it's bouncing but we need more
4:35
confirmation to be confident in a
4:37
sustained continued rise
