Trade War: Escalation Phase

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We know a 5% correction falls into the normal and to be expected category. How concerning is a 90% down day? As shown in the table below from Pension Partners, forward returns and percent positive figures for the S&P 500 are slightly better following a 90% down day relative to an average day.

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The chart below provides a good visual proxy for them, thus far, a relatively small shift in the data related to the market’s longer-term trend. The S&P 500 closed below the 50-day and below the gap. Price still remains above a still upward-sloping 200-day.

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The VIX was a mixed bag during Monday’s session. It printed a daily closing high above last week’s high, but the intraday spike was lower than last week’s spike. Since closing prices tend to be more relevant, it is probably fair to say the VIX closed Monday in “still concerned” mode.

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As noted in this video clip, even under a favorable longer-term outcome scenario, the market may continue to be volatile over the next 90 days. It is possible we will sit tight for the remainder of the week; it is possible the data will call for additional incremental steps to reduce exposure to risk assets. We will continue to take it day by day with an open mind about all outcomes.

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Disclaimer: The opinions in this document are for informational and educational purposes only and should not be construed as a recommendation to buy or sell the stocks mentioned or to solicit ...

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