Summary: Despite last week’s historic selloff, market pricing suggests investors are still holding out hope for a quick resolution to tariff-induced uncertainty. But with volatility surging and economic signals flashing caution, sentiment is increasingly fragile. While major indexes steadied Monday, the path forward remains tied to policy — and politics.
Waiting To Exhale
📉 Market Performance (Monday):
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Dow Jones Industrial Average: ↓ 349 pts / -0.9%
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$S&P 500(.SPX)$ : ↓ 0.2% (Closed at 5,062)
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$NASDAQ(.IXIC)$ : ↑ 0.1% $NVIDIA(NVDA)$ $Palantir Technologies Inc.(PLTR)$
Stocks
The modest end-of-day moves masked a whipsaw session, with an early rally on tariff-pause optimism reversing quickly as President Trump doubled down on additional levies.
Investor Sentiment: Fragile but Not Broken
Even after shedding $5 trillion in value over the past week, the S&P 500 still trades at 18.7x 2025 earnings, implying optimism about growth and resolution. Only the most bullish scenarios support valuations at these levels, suggesting a market priced for a relatively swift fix.
“Markets are still pricing in a fairly rapid solution to today’s uncertainty,” said analysts during today’s Morning Briefing.
However, hedging activity is surging. According to Goldman Sachs, hedge funds posted record short-selling activity in the days following Trump’s tariff announcement. The CBOE Volatility Index (VIX) closed at 47.0 — roughly 3 to 4 standard deviations above its historical mean — underscoring how nervous the market remains.
Macro Data Highlights:
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Job Growth: March nonfarm payrolls beat estimates (+228,000), but failed to lift sentiment.
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Fed Policy: Despite rising rate cut expectations, Chair Powell warned tariffs could increase inflation and complicate the Fed’s response.
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Recession Talk: BlackRock CEO Larry Fink noted, “Most CEOs I talk to would say we are probably in a recession right now.”
Global Trade Developments:
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Trump Admin: No sign of tariff pause — additional 50% tariffs on China floated.
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China: Responded with 34% tariffs and export controls.
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EU: Announced 10–25% tariffs on various U.S. goods, but spared key items like bourbon and wine after industry lobbying.
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ECB: Markets now price in a 90% chance of a rate cut on April 17 as the eurozone teeters toward recession.
Disruption in Focus:
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Big Tech Pressure: Tech stocks remain exposed. Average declines still trail 2022 bear market lows (-33% vs. -53%). $Roundhill Magnificent Seven ETF(MAGS)$
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$Apple(AAPL)$ Surge in Sales: Short-term boost as buyers rush to avoid potential post-tariff iPhone price hikes.
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AI Impact: Shopify mandates AI-efficiency tests before hiring new staff, highlighting a broader shift in workforce strategy.
What Could Turn the Tide?
Citi estimates S&P 500 fair value under persistent tariffs is closer to 4,700 — well below current levels.
A sustained reversal likely hinges on a coordinated policy shift:
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Congressional tax cut legislation (with debt ceiling pressure as a catalyst),
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Concrete trade deals and tariff rollbacks,
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Signals of deregulation and monetary support.
Looking Ahead:
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Watch for signs of trade negotiations or tariff concessions.
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Monitor upcoming Fed minutes and ECB announcements.
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Corporate earnings season kicks off next week, and will offer key insight into how companies are absorbing cost shocks.
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A sustained VIX decline could be an early sign of stabilization.
Investor patience is being tested, but equity valuations suggest markets are not yet priced for prolonged pain. As one strategist put it: “Investors would be thrilled just to see a different set of headlines.”
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This summary is for informational purposes only and does not constitute financial advice. Investors should conduct their own research before making investment decisions.
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