04/09 - Market Update: Whipsawed

Stocks and Indices notch their best day dating back to the 1980-2000 era...but the death cross still looms.

Was Liberation Day delayed by a week?

We’ve been discussing the potential for a day like this during my TikTok Lives. But watching it actually play out — in real-time — was both exhilarating and mind-numbing. President Trump’s tactics today were straight from the classic negotiations playbook — and what we saw was the culmination of high-level chess moves, planned and manoeuvred with precision. Right?

This Substack is still all about using data to help us make informed decisions. We could make educated guesses all day on how things might play out next, but that would be called speculation.

Proceeding with Cautious Optimism

That’s the mindset I’m leaning into — and what I encourage you to adopt too.

I don’t want to be the “Debbie Downer” (really, I don’t), but having lived through three major economic downturns, I’m not convinced we’re out of the woods yet. Here’s why:

• The yield on the 10-year treasury spiked - it was over 4.5% at some point today but has fallen down to 4.33%. You would think that today’s announcement would have brought it down more significantly, given that more subdued tariffs should mean lower expectations for long-term inflation.

• Every bear market has days like today - During the financial crisis in October 2008, the NASDAQ enjoyed two of its best five days ever. The other two came as the tech bubble was bursting. The index’s sixth-best day since its beginning in 1971 came on March 13, 2020, as the Covid pandemic was hitting the U.S.

  88% of the NASDAQ’s best 25 days took place during the dot-com collapse, the 2008-09 financial crisis or the early days of Covid.

• The S&P500 is about to form a death-cross - this occurs when the 50-day moving average crosses down below the 200-day moving average:

The S&P500 is on the brink of a death-cross where the 50-day moving average (neon green) crosses below the 200-day moving average (maroon).

The last time this happened was March 2022 as the fastest rate-hike cycle since the 1980s began. Similar to today, the S&P500 was in oversold conditions shortly before the death-cross officially formed on March 14th. The index rallied 11% from March 14 to 29 where it then hit resistance and continued its descent for 7 more months before reaching the ultimate bottom in October 2022 resulting in a 37% decline from its January 2022 peak.