Let’s Talk About That Crazy Liberation Day In The Markets

Happy Liberation Day!

For most investors, the only thing they’re getting liberated from is the money in their portfolios. If Trump’s tariffs had ended up being roughly what the market expected, I think we could have very well seen a neutral or even a positive reaction from risk assets.

But they didn’t. The tariffs ended up being much more aggressive than expected and, although some key products, such as semiconductors and lumber, were exempt from certain tariffs, this marked a big escalation in the trade war that I’m not sure can be so easily walked back.

It’s one thing to talk about tariffs in a TV interview. But when you have a big Rose Garden ceremony announcing them, you’re kind of pot-committed.

What’s interesting is how the markets reacted. Yes, much of what we saw on the screens was blood red, but not all of it. And some asset classes didn’t quite respond how you’d expect. I don’t want to put too much weight into one day’s trading activity, but I think this day in particular might provide some good insight into what the market was thinking & doing.

Thursday Returns For The Major Asset Classes

While losses in the market were humbling and painful, I wouldn’t say yet that they represented a capitulation.

The VIX pushed through 30, but for the most part the sell-off seemed strangely orderly. There were some up-and-down fluctuations in the major averages, but not any severe whipsaws that suggested things were starting to go off the rails.

This could mean that there’s more downside ahead. A big spike in the VIX or high yield spreads coupled with almost everything getting sold off would represent investors throwing in the towel. Those types of events tend to mark bottoms in the market. I don’t think we saw that here.

Let’s do a rundown of each of the major assets that I follow and what their activity meant.