The Market Brief
Hey team. A global stocks selloff fuelled by concerns about the American economy eased as US equity futures signaled modest recovery during early trading.
Let’s re-cap the last session and see what’s ahead for the markets!
Impact Snapshot
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Macro Viewpoint
U.S. major stock indexes experienced a sharp decline on Monday, as concerns grow that President Donald Trump's tariff policy could push the world's largest economy into a recession.
Investor sentiment remains jittery, with Wall Street adjusting its optimistic outlook in light of fears that tariffs and potential government spending cuts could negatively impact U.S. economic growth.
Additionally, there is a growing belief that President Trump may not step in to support the market, while the Federal Reserve has indicated that it is not in a hurry to change its interest rate policy.
Price Action Leads News
Your understanding of the above headline, or the lack thereof will drastically change how you view markets.
Since the end of last month, we started sharing evidence of what has been going on behind the scenes and pointed out the unusual increase in volume that accompanied the start of the pullback on 2-21.
Volume, as pointed out, shows interest behind a move. If a directional move is accompanied by higher volume, it’s evidence that there is something more than just a “phase” of retail traders being in panic mode.
Said otherwise, if lower prices bring in more volume it shows that the market has not gone low enough in order to shut off that selling.
Combine this with evidence of absorption further adds to this sentiment.
Our next update on that matter further contributed to sentiment with another research report we’ve included on our Friday’s Substack.
Following what senior money is doing, as opposed to short-term undercapitalised traders, is the primary focus of our reports. Understanding the difference between retail-triggered sell-offs versus institutional activity is key.
Fund managers have aggressively unwound positions in individual stocks at the highest rate in over two years, with some activity resembling the market turbulence of March 2020, when portfolio managers reduced exposure amid the pandemic.
Although trading and investing are two different fields (literally), knowing what is happening beneath the market’s surface can help you better adjust your potential trading targets, set your expectations in order, and manage your risk accordingly.
TLDR version; Companies don’t like uncertainty because it causes them to hold back their expansionary plans until they gain more clarity. The recent U.S. policies, combined with the long equity exposure of big money managers, have led to this unwinding, with the S&P 500 posting its worst day since 2022 yesterday and $1.4T in market cap wiped out.