Weekly Notes from Tim
By Tim Holland, CFA, Chief Investment Officer
- We were on a call recently with a fantastic financial advisor, just a great person and professional who said if you are going to invest you need to be an optimist and not an opportunist. As it concerns the former, he meant that if you are going to put your hard-earned money into the market, you must believe – and he and we think you should believe – in the long-term wealth creation potential of the economic miracle that is the United States of America. As it concerns the latter, he meant that an opportunist is someone who is going to try and jump into and out of the market, to try and opportunistically time their buys and sells to maximize their rate of return. We would not advise going down that path as we think it leads to well above average trading costs and well below average returns.
- One reason market timing is so difficult is that the market’s best days often follow on its worst days, so just when we can’t take the volatility anymore, when we have reached the point of maximum emotional stress, and we finally move out of stocks, the market can bottom and then shoot higher. April is a case in point; on the 7th, on an intra-day basis, the S&P 500 was off 14% month to date, as markets moved sharply lower on the heels of President Trump’s April 2nd announcement of baseline and reciprocal tariffs (in fact, April 3rd and 4th were the two worst days in the history of US stocks, as more than $6.5 trillion in shareholder value was wiped out). Then, when the President announced a 90-day pause on most reciprocal tariffs on April 9th, the market shot higher, ultimately rallying more than 15% from its lows into month-end and clawing back almost all its losses for the month to finish April off just 0.8%.
- To put a broader, historical point on the idea that the market’s best days often follow on its worst days, consider the 10 worst days for the S&P 500 beginning with 1987’s Black Monday…nine times out of ten, the market was positive over the next twelve months, and over all nine time periods it delivered returns that were well above the S&P’s long-term average performance (see graph and dataset below). As with markets, as with life, it seems its always darkest before the dawn.
Looking Back, Looking Ahead
By Ben Vaske, BFA, Senior Investment Strategist
Last Week
Equity markets were mixed last week. The S&P snapped a multi-week winning streak, losing less than 1%, coming off one of its longest daily streak of gains in recent years. For context, the index is up nearly 14% from its low price on April 8th, following volatility rising from “Liberation Day.” International equities were about flat, though are outperforming US equities by about 17% YTD (MSCI EAFE vs. S&P 500).
Big, or maybe not-so-big, news on the economy came from the FOMC holding rates steady once again on Wednesday. Powell noted that more certainty is needed around U.S. trade policy before monetary policy can be meaningfully adjusted.
On a similar note, the first U.S. trade deal was announced last week with the United Kingdom. While there wasn’t a fully fleshed deal made, there was a framework put in place for future trade negotiations. As of this writing, the U.S.’s 10% tariff on imports from the UK remains in place, though some concessions were made pertaining to auto imports.
This Week
Looking forward to this week, Q1 earnings season will continue, with about 10% of companies left to report over the next couple weeks.
The economic calendar is jam-packed — we’ll see fresh data on inflation with both the Consumer Price Index and Producer Price Index being released. We’ll also get a fresh look at the U.S. consumer, with U.S. retail sales being released on Thursday.
Over this last weekend, the U.S. did begin trade negotiations with China, with a meaningful pause on retaliatory tariffs announced on Monday morning as negotiations are set to continue — we’ll be watching closely to see any indications of a more official deal being made and any further reconciliations being shared from either country.
We hope you have a great week. If there’s anything we can do to help you, please feel free to reach out to ben.vaske@orion.com or opsresearch@orion.com.