Thursday Thoughts
Thursday Hangover?
Markets have delivered jaw-dropping vol in the past few weeks. Yesterday saw the SPX rally +9.5%, marking its 3rd largest 1d move this century, while the Nasdaq surged over 12%. Yet, despite the massive bounce, caution is required.
Yesterday’s key BBG headlines:
*US WEIGHS FARMER BAILOUT AS CHINA RETALIATION THREATENS EXPORTS
*AMAZON CANCELS SOME INVENTORY ORDERS FROM CHINA AFTER TARIFFS
*TRUMP: RAISING THE TARIFFS ON CHINA TO 125 PERCENT
*TRUMP: AUTHORIZED A 90 DAY PAUSE ON NONRETALIATING COUNTRIES
*TRUMP: WAS WATCHING THE BOND MARKET
*BESSENT DESCRIBES INITIAL TRUMP TARIFFS AS 'MAXIMUM LEVEL’
*NO CHANGE TO CANADA, MEXICO TARIFFS: US OFFICIAL
*NO CHANGE TO AUTOS, STEEL, ALUMINUM TARIFFS: US OFFICIAL
From a tactical perspective, it seems reflexivity has indeed kicked in, the Trump put, if you will, but structural damage has likely been done. The geopolitical cold conflict with China is far from resolved, promising ongoing challenges and uncertainty for global supply chains. I personally expected markets to chop aggressively in the coming months.
In short, this environment demands discipline and clarity. On Monday we saw 851bps intraday, 727bps on Tuesday and 1077bps on Wednesday - It’s not the time for heroes; it’s a time for cautious realism.
Given this backdrop, I've made a major decision to dramatically re-balance my L/S portfolio.