*This is a sequel to 3.15.2025 Thoughts (Text from that post is in orange)
Trump’s Strategy: Negotiating aggressively, aiming to boost U.S. tariff revenue from $50B to $200B while keeping markets stable.
Well April 2nd Tariff announced was a jolt to the market resulting in brutal sell off on 2nd (5%), 3rd (6%). The reciprocal tariffs were beyond what I am assuming in my base case while being on the extreme side trying to get $700B of tariff revenue.
7th Monday open was red too then there was a grapevine of 90 day pause on Tariffs when market reversed to green. Monday and Tuesday saw crazy whipsaws of intraday reversal bottom to top of 9% movements on index
8th Tuesday: Market opened quite low due to afterhours selling on Monday (I did FOMO and bought some stocks but not at low instead after recovery in the afternoon)
9th Wednesday official announcement of 90 day pause and indexes up almost 9-10%. (It is official whenever I sell in a bear market that is the official bottom no kidding, I say this because I sold whatever I bought on Tuesday on open while the markets rip after 90 days pause announced at 1:15pm)
10th Thursday: Indexes give back some of the gains due to short covering rally (I sell whatever I bought on 9th around market open)
11th Friday: While market up 1-2%, relatively uneventful day considering early part of the week.
Short Window (2-3 Months): Must act before hiring and business investments slow due to uncertainty.
I think this window is even shorter and market/businesses are looking for clarity on tariffs especially with China by the end of April to possibly avoid a recession. Looks like we will be in a recession in spite of a 90 day pause for all other countries, feels like business confidence is punctured only some kind of stimulative measures or time will heal the situation
(Economic Goals: Reduce budget deficit to 2%, shift from government-driven growth to a private-based economy.
Inflation Control: Use tariffs, economic uncertainty, and monetary tools to lower the 10-year Treasury yield, enabling the refinancing of 30% of U.S. Treasuries.
Growth Strategy: Once inflation eases, cut income and corporate taxes to stimulate growth while keeping gas prices low through geopolitical moves.)
All the above 3 (Budget deficit, Inflation control, Growth) are after thought for an investor who is trying to figure out if we are in a recession already.
Having said that the 10 Year bond yield jumped to 4.5% earlier this week. There is grapevine in the market saying it could be China selling some of their $800B of US treasuries stockpile. Some people say it is the bond yields spiking which forced the US to make faster decision around tariff pause.
What could the market reaction be:
Scenario 1: I see a situation of a temporary V-shaped recovery once the China tariffs are negotiated and settled but we will still slow bleed into a market pricing in recession.
Scenario 2: With the earnings season in 3-4 weeks stocks may gap down after lower guidance pricing in a recession discounting the future
What I am doing:
Another 10-15% decline is easily on the cards. Based on Friday’s reaction to China’s retaliatory tariffs market already digested all tariff bad news and looking ahead for clues about the economy. I am waiting with some dry powder to deploy once market prices in recession. (Time will tell if already bottomed)
Things to improve on:
Going short Triple QQQ on March 31st (2% of Portfolio) when the long-term signal from technical was confirmed
Watch Bill Ackman closely: He has been clamoring for a 90 day pause since Monday morning on Twitter which made total sense. I remember he was on CNBC during covid about a lock down to settle the situation. I have a view if he is expressing out loud then we are closer to a market extreme/turn.
Uday Reddy 