‘To Retest or Not to Retest?’

Featured Quote: Dirty Harry

“I know what you're thinking. "Did he fire six shots or only five?"

Source: Clint Eastwood, Dirty Harry movie 1971

Featured Chart: SELL-off Indicator

FIG 1: Longview SELL-off indicator vs. S&P500

Market Roulette (or just ‘business as usual’) ?

Markets, at the moment, can feel a bit like the guy staring down the barrel of ‘Dirty Harry’s’ gun – i.e. ‘a bit of a lottery’! That is, policy announcements from the new US Administration, which are less than 4 months into their four year term, seem to be driving wild swings in the equity market.

On the election of Trump, the immediate market/macro theme was the ‘return of animal spirits’, with general business conditions expected to be much improved (as a result of his policies, deregulation, freeing up bank capital etc.). With that, equity markets reached record highs (i.e. in mid Feb)

Then, on ‘Liberation Day’ (April 2^nd), the market was shocked by the size and breadth of the ‘reciprocal’ tariffs – and sold down sharply (to the April 7^th intraday low). Then, a few weeks later, the ‘Trump put’ level is found (as the bond market becomes disorderly), and the 90 day pause is announced. Those events, followed by various more conciliatory trade announcements/discussions etc (including the recent China-US trade talks), propelled the S&P500 back into positive territory YTD.

However, despite that ‘roulette’ feel to investing of late, there are ways to navigate these markets.

Three, in particular, have been critical: