Image Source: Pixabay

The end of last week was one of the most tumultuous two days seen in decades for price action, fiscal policy, and uncertainty among investors. However, let’s start with the good news.

U.S. companies and citizens are extremely resourceful and have a history of finding solutions to tough situations. This country is in a tough situation, and we’ll find a solution.

As tactical, active investors, our objective is to adapt to this new economic and geopolitical environment by mitigating the risks and drawdowns of initial shocks and position ourselves to capitalize on the winning trends that will emerge in the future.

To be clear, the tough situation (among many) that I’m focused on is an unprecedented fiscal policy with respect to tariffs. Following the Wednesday evening announcement of the new tariffs, the market lost $6.6 trillion in value in the following two days. In the two charts below, you can see the size of the weekly change in the S&P 500 relative to weekly changes dating back to 1994.

Weekly Percent Changes Since The Great Recession

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Perspective Back To The Dot.Com Bull and Bear Markets

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As you can see, it was an extraordinary week. Unfortunately, it also represents a market where price action, investor sentiment, and consumer sentiment have deteriorated from bad (as we wrote about last week) to worse. This was demonstrated by the following:

• Markets plunging – as seen in both risk-on and defensive assets
• Analysts slashing market forecast targets
• Economists raising their predictive probabilities for a recession in the near-term
• Congressmen (even some Republicans) expressing discontent with how extreme the policy is
• Citizens protesting around the country
• Companies canceling planned IPO dates

In short, despite the well-telegraphed intentions to implement an unusually tough tariff policy, the world found it to be worse than expected. And markets hate “worse than expected.”

Markets don’t like uncertainty. Many investors were hoping for a “sell the rummer, buy the news event,” in which case bad news is greeted with buying because the news defines and creates certainty around the “worst case” scenario, and news flow can then change from getting worse to getting “less bad.”

Opportunistically thinking, the best tactical “buying opportunities” occur when market sentiment shifts from “the worst” to “less bad”. We are not there yet, but for the nimble investor, this should be a key focus, and we will seek to identify that point in time when it arrives.

Additionally, there is a belief that if Trump were to take action that would make the tariff policy less extreme, it would create a “less bad” event capable of slowing, if not reversing, the market's decline.

Hoping for a more lenient tariff policy by Trump, however, is part of what led to the shock of Wednesday’s announcement, and this is not an investment strategy. As you can see in the table below, 2025 has gotten off to a historically bearish start. However, there is precedent for tactical, active investors to remain optimistic that such a decline will lead to significant opportunities.

Now, I'll hand things over to Keith.

Every week, we review the big picture of the market's technical condition as seen through the lens of our data charts. The bullets below provide a quick summary organized by conditions we see as being risk-on, risk-off, or neutral.

Summary

Markets sold off hard as they processed the new round of tariffs and potential retaliation, as volatility spiked to the highest in five years and equities hit extreme oversold levels. Mean reversion is possible, but it's still too early to tell. Given the continued headline risks, caution is warranted.

Risk-On

• Amidst the turmoil, Bitcoin heroically held all week at its recent levels and above its 200-Day Moving Average.

Neutral

• The McClellan Oscillator, after briefly turning positive on Tuesday, swung back down to around the -150 level, which may often offer support.
• Gold, after hitting new all-time highs on Monday, finally retreated on Friday, but only back into last week’s levels.
• The dollar stumbled hard initially on the tariff news, but the greenback mostly recovered to close out the week.
• Rates had a slightly subdued reaction to all the chaos this week, with the long bonds recovering their 200-Day Moving Average. However, relatively little change was seen in their trading ranges for the last six weeks.
• Seasonally, April tends to be a good month for equities, though the current headlines will likely dwarf seasonal trends as a catalyst for the market.

Risk-Off

• Markets absorbed one of their worst weeks in quite a while, with readings of -7.6% in the Dow to -9.76% in the Nasdaq. Indexes hit extreme oversold levels across the board in price and real motion, as they revisited six- and 12-month lows. Given the news-driven nature of this correction, technical oversold levels should be approached with caution.
• All sectors were down this week, with energy, transportation, and technology taking the hardest hits. Homebuilders, utilities, and consumer staples fared the best.
• Risk gauges have remained fully risk-off.
• The new high/new low ratio is negatively stacked, sloped, and has reached extreme levels.
• Cash volatility spiked to the highest levels seen since 2020, marginally exceeding the spike levels we saw last August in that technology flash-crash.
• Value stocks continued to outperform growth stocks in this most recent sell-off, though both were hit hard.
• Many sector ETFs have been in bearish phases (with KRE as the lone holdout, but it appears to be headed in the same direction) and all of them were well below their 200-Day Moving Averages. Retail (XRT) outperformed, down only about half the broader market.
• Global equities took a hit from the tariff talk, with emerging and developed foreign equities unable to sidestep the rout. Emerging market equities have been outperforming developed markets over the last couple weeks.
• Copper collapsed back down to its 200-Day Moving Average, erasing the last two months of work, with a similar but smaller drop seen in soft commodities (DBA).
• Oil took an outsized hit this week, likely from concerns about global trade amid tariff talk and a shift in the dollar.

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