Hold the Applause—This Volatility Ain’t Over Yet

A historic rally, a tariff war, and why I said “buy” on live TV.

KEY TAKEAWAYS

• The S&P 500 surged 9.52% in a single day—the biggest gain since October 2008.
• The rally was triggered by news that the President may delay certain tariffs.
• Despite the rally, long-term economic risks—like recession and reduced business investment—remain elevated.
• High-quality growth stocks like NVIDIA are trading at discounted valuations.
• Long-term investors with conviction and patience may find this a rare opportunity.

MY HOT TAKES

• The 104% tariff was likely a negotiation tactic—not a policy endpoint.
• Volatility is likely to continue; traders beware.
• The recent rally doesn’t signal the end of this correction cycle.
• Policy risk remains the single biggest driver of market moves.
• History shows buying after big bounce days can pay off—but only with a long horizon.
• You can quote me: “This dangerous game of poker between economic superpowers is far from over.”

Highway to the Danger Zone. Now would be a good time to take a chill. In other words, calm down, take a breath and assess. Stocks have been a frenzied ride over the past several sessions. In the last 6 sessions alone, the S&P 500 has traded within a 15% range, with yesterday’s 9.52% gain logging the largest single day-percent gain since October of 2008. October 28th, 2008, to be exact, when the Big Index climbed by 10.81%. That was 6,027 days ago; to give you an idea of how rare yesterday’s single-day move was.

The start of the day was no ordinary one. Indexes were in the red and tensions were high, after the prior day’s session left the S&P 500 below a key support level. China was fighting back with its own counter-tariffs and the bond market was taking on lots of water (yields were climbing and staying elevated). The air was thin, and there was no telling how the President would react to the Chinese return fire in response to his jacking China’s effective tariff rate to 104%. Not surprisingly, stocks drifted sideways in the morning session, but that would all change in an instant at around 1:18 Wall Street Time, when the S&P shot up by around 6% in under 10 minutes. The rumor, this time, that the President would offer a 90-day stay to certain tariffs, was confirmed. It was real, unlike the earlier in the week “leak” that was not, which caused an 8% whipsaw. And the rest is history, as one would say. But what are we supposed to do now?

I want to take you behind the scenes for a moment. As I implied in yesterday's post, I spoke to a reporter the night before just after the S&P closed below 5,000 which was considered the “danger zone” by many technicians. I admitted to her that I was actually a bit positive after the President raised Chinese tariffs to an untenable 104% earlier in the day. I recognized that this was such an extreme, frontal assault, that it appeared similar to the President’s 2018 negotiation tactics. A concession was likely to follow. As I uttered those words, I got goosebumps, and by the time I tucked into my supper, there was part of me that was concerned that I might have appeared reckless to admit my positivity. Would the reporter misinterpret my intent?

To be clear, I was in no way trying to call a bottom to the market’s recent spill. On the contrary, I was still extremely concerned that the probability for a recession was increasing day by day, according to my analysis, which echoed the concerns of many other strategists on the Street. However, I was optimistic that the President’s last salvo and some of his veiled body language would at least take this tariff tit-for-tat to the next level… negotiations. It turns out that the reporter, whom I have a lot of respect for, did not misrepresent what I said and actually quoted me verbatim. You can read it here. Actually, here is my exact quote:

“It’s not good, this kind of market close. Even though the rally lost steam in the afternoon, we could have, should have had a better close. Stocks have already factored in a trade war and there wasn’t enough new news to knock the market down further by changing what is already priced in materially. There are going to be a lot of technical traders tonight scratching their heads. But I’m still slightly positive, which is rare for me recently. I think the body language coming from the administration signals that they’d rather negotiate, that the 104% tariffs on China we heard about later in the session are a negotiating tactic.”

Fast forward to yesterday morning, where I was live on Fox Business News Mornings With Maria. Based on my prior day’s assessment and the fact that I am a long-term investor, I was not uncomfortable to say that this might be time to consider buying solid stocks that were on sale. What do I mean by that? Well, if you liked NVIDIA but were concerned about buying it at a 54x PE, you should be thrilled to buy its current PE of 39x. If you believe that there is growth upside in the broader tech sector and even more specifically, the AI ecosystem, these multiples make those stocks appear attractive. 

Now, here is the disclaimer, so pay attention. This is only applicable for long-term investors! Moreover, given the current economic climate, it is only appropriate for consideration by investors who can tolerate drawdowns and lots of volatility, who, in the long run, wish to tap into extra-normal earnings growth potential. 

So, indeed, I did say that these levels have served up some buying opportunities on live, National TV 😨, and the market did, indeed make me, along with at least two of the other guests who agreed with me, feel vindicated when the closing bell rang yesterday.

Thank you for the applause, 🙏 but, some more clarity is warranted here. Foremost, this dangerous game of poker between economic superpowers is far from over. Moreover, there is already irreparable damage caused by more recent policies. And, lest we forget, there still remains a 25% steel and aluminum tariff, a 25% auto tariff, a 124% Chinese tariff, and the rest of the world will be tariffed at 10%. Prices are still likely to rise, and businesses will, without a doubt, continue to spend less on capital investment, marketing, and labor (that last one means hiring freezes and job cuts). Oh, and did I mention that the President can change his mind at any time?

Yesterday’s move was impressive, and I am happy to say that I was not too surprised, but all that said, what should you do? Stay focused on what’s important. Do NOT try to trade this market as there is likely to be capitulation in coming days along with an extended period of elevated volatily. Being able to buy high-growth potential stocks with solid fundamentals at a discount is a rare opportunity. Converting that to long-term profit takes a lot of conviction and focus–two disciplines which are hard to practice in this environment. This is the time to stay frosty. 

I want to leave you with this tidbit of history. That last big percentage-gain day on October 28th would not prove to be the bottom. After a few days of gain, the market lost ground. There was one more attempt to break out on the upside in January of 2009, before the market slid to what would be the low, in March. If you had gone all in on October 19th, you would have lost around -27% over the four months that followed. But there is some good news. If you were truly a long-term focused investor, you would have earned some 492% through yesterday’s close.

YESTERDAY’S MARKETS

Stocks had a Wild–with a capital ‘W’--ride yesterday after stocks surged in response to the President staying his MOAT (mother of all tariffs) package for 90 days. Early-session losses in response to a Chinese counter-tariff gave way to the second largest single gain in Nasdaq history. Bond traders were not as sanguine as their distant cousin stock traders as Treasury yields remained elevated.

NEXT UP

• Consumer Price Index / CPI (March) is expected to have pulled back to 2.5% from 2.8%.
• Initial Jobless Claims (April 5th) is expected to come in at 223k, slightly higher than last week’s 219k claims.
• Fed speakers today: Logan, Schmid, Goolsbee, and Harker.
• The Treasury will auction $22 billion 20-year Bonds. Yesterday’s 10-year Note auction was a success drawing significant demand–not surprising, given that yields are higher than in recent months. A weak auction could send negatives through the market, so be alert at 1:00 PM Wall Street Time.

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