Week of Apr 06 2025

Market Wrap

Weekly Benchmarks - @Koyfin

Weekly Factors vs. S&P 500 - @Koyfin

Weekly Performance - @Koyfin

Outlook

President Trump's "Liberation Day" tariff announcements dominated Week 14, triggering one of the most severe market corrections since the pandemic. The tariffs – a 10% blanket on all imports, additional country-specific "reciprocal" tariffs for 60 "worst offenders," and permanent 25% tariffs on autos, steel, and aluminum – will raise the effective U.S. tariff rate to nearly 20%, levels not seen since the Smoot-Hawley era of the 1930s. Markets reacted violently with the S&P 500 plunging 10.5% over two days to approximately 5,073, a 17.4% correction from November highs. The Nasdaq entered bear market territory while small caps fell roughly 25%. Treasury yields plummeted in a bull-flattening of the curve, with the 10-year approaching 4%, while gold surged to a record $3,192 per ounce as investors sought safety. Friday's surprisingly strong jobs report (228,000 new positions versus expectations of 140,000-200,000) provided little comfort as investors viewed this data as backward-looking and unable to capture the dramatic shift in economic landscape. Major financial institutions have dramatically revised forecasts, with JPMorgan placing recession probability at 60% and estimating the tariff impact at $700 billion (2.4% of GDP). Barclays now projects core CPI reaching 4.1%, GDP declining by 0.1%, and unemployment rising to 4.6% by year-end.

The Federal Reserve faces an extraordinary policy dilemma between rising inflation and slowing growth. Chairman Powell acknowledged tariffs will mean "higher inflation and slower growth" and warned that tariff-related inflation might not be "transitory." Meanwhile, Fed Funds Futures indicate a 56% probability of 100+ basis points in cuts this year, even as President Trump publicly demands immediate rate cuts. Further complicating matters, the Senate published reconciliation instructions for a tax bill with $1.5 trillion in cuts and minimal spending reductions, potentially adding $7 trillion to the deficit over the next decade. BofA's "Deficits to the moon" forecast projects deficits reaching 7.1% of GDP in FY 2026, well above consensus estimates.

Fund flows show defensive positioning with $22.5 billion moving to cash, $9.4 billion to bonds, and $2.5 billion to gold. Year-to-date returns display a clear flight to safety: gold (+17.8%), government bonds (+5.3%), and investment grade bonds (+4.2%), while stocks have fallen 3.5% and cryptocurrencies have plummeted 33.6%. Key technical thresholds include support at 5,500 for the S&P 500, CTA pivot levels at 5,830 (short term) and 5,860 (medium term), the VIX at 30.0 (well above the "consider buying" threshold of 27.3), the SOX semiconductor index needing to rebound above 4000, and the XBD broker-dealer index holding its 200-day moving average at 262.

Left tail risks center on tariffs remaining in place, leading to stagflationary recession, potentially exacerbated if the Fed cannot cut rates due to persistent inflation. Right tail risks depend on a rapid "Reconciliation Day" scenario where tariffs prove shorter-lived than feared, with negotiations reducing rates or shifting focus to growth-oriented policies.

Week 15's catalysts include FOMC minutes (April 9th), March CPI (April 10th, forecasted at 0.1% m/m headline and 0.3% m/m core), PPI (April 11th), and preliminary University of Michigan Consumer Sentiment. Markets will remain hypersensitive to signals regarding tariff modifications, international retaliation, or policy shifts that might halt the market's decline.

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Calendar (UTC-4)

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Macro Dashboard

Forward Earnings

Metric	UpDn	This Week	Prior Week	Baseline	Baseline TF
Forward 4-qtr Estimate	🔵	278.96	269.12	269.12	March 28, 2025
Forward 4-qtr PE	🔴	18.2	21.2	21.2	March 28, 2025
Nominal Earnings Yield	🔵	5.49	4.72	4.72	March 28, 2025

Volatility & Correlations

Metric	UpDn	This Week	Prior Week	Net CHG	% CHG
VIX3M - VIX1M 10d Z	🔴	-2.72	-1.41	-1.31	-92.91%
COR3M	🔵	44.44	26.06	18.38	70.53%
COR1M	🔵	45.83	27.15	18.68	68.8%
Equity Put/Call Ratio	🔴	0.64	0.68	-0.04	-5.88%
VIX Put/Call Ratio	🔴	0.6	0.64	-0.04	-6.25%
SPX/SPXW Put/Call Ratio	🔵	1.78	1.27	0.51	40.16%
OEX Put/Call Ratio	🔵	21	1.5	19.5	1,300%

Cross-Asset Volatility — CBOE

Cross-Asset Correlation — CBOE

S&P 500 Futures

Higher TF (W → D) BEARISH - Underhedged positioning contributed to a massive spike and historic weekly range (699.25), occurring primarily across two sessions. The -10% move in consecutive days constituted a "crash" as volatility surged to a closing +3σ VIX of 45.32. Note the convergence of the now-broken higher timeframe trend line and 2022 high of 5348.50—an eventual breakout pullback would likely find resistance at this level. Meanwhile, odds favor vacuuming below the 2024 low of 5016.25 (-1.84%) and possibly mitigating the naked quarterly VPOC (Q4 2023) at 4932.75 (circled in chart 1).

Lower TF (3H → M30) BEARISH - The deeper 5285.25 target (-6.01%) relative to the prior week (13's) settlement was activated when price broke below the previous YTD low, but offered no support, indicating urgent selling that gained momentum on Friday, extending to nearly twice the measured move target of 5009.25 (see chart 1 above). The immediate question is whether price will break down and extend below the 2024 range or face an inevitable pullback (likely two legs up). In the latter case, sellers will be responsive at Thursday's RTH low of 5428.50, which lies beyond this week's +1σ implied range (+5.59%).

ATM IV30 36.06% v HV 29.03% IV-HV +7.03%
Bulls will seek to reclaim RTH DTF 1TFU > 5314.50 (+4.00%) on a closing basis. Upside: Recapture WVAL 5435 (+6.35%) is beyond +1σ (W) 5396.00 (+5.59%).
Bears will seek range extension below WLO and ideally the 2024 LO 5016.25 (-1.84%) on a closing basis. Downside: Naked Q423 VPOC 4930 is within -1σ (W) 4853 (-5.03%).

Last Week: 5110.25 JUN25 -9.36% DTE 75.84
Bulls will seek to defend the March low and ideally form a HL > 5561.25 on a closing basis. Upside: Reclaim DTF 1TFU > 5747.75 (and WVAL) is within +1σ (W) 5769.00 (+2.60%).
Bears will seek to expand range below WLO on a closing basis. Downside: < March (YTD) LO 5561 (-1.1%); MM Target 5463.25 (-2.84%) is just beyond -1σ (W) 5484 (-2.47%).

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