“There are decades when nothing happens, and there are weeks when decades happen…”
An observation that perfectly sums up a whirlwind of a week.
Since President Trump announced sweeping new tariffs on April 2, America has redefined its relationship with the rest of the world.
And everyone is trying to figure out what’s going to happen next.
As Malaysia’s Minister of Investment, Trade and Industry put it: “Nothing is certain but uncertainty when it comes to Trump tariffs!”
Meanwhile, the U.S. stock market has reacted like it was tossed into a blender.
On Monday, the S&P 500 experienced its biggest intraday swing since March 2020, during the Covid-19 pandemic. Ultimately, it ended the day down 0.2%.
That was already 17.6% below February’s peak.
But things got worse on Tuesday as the S&P 500 dropped another 1.57%.
This wrapped up the steepest four days of losses since the index was created in the 1950s.
Then Trump reversed course on Wednesday and announced a 90-day pause on reciprocal tariffs for most countries, with China as the glaring exception.
That’s all it took for the market to surge.
By the end of the day, the S&P 500 gained more than 9%. It was its third-largest gain in a single day since World War II.
But that historic rally was short-lived. Yesterday, the S&P fell another 3.5%.
Now that China has hit back with its own tariffs on U.S. goods, it seems we’re heading into a full-blown trade war.
And even with the possibility of a rally today, investors are still on edge.
We can tell by checking Wall Street’s biggest warning sign, the so-called “fear gauge.”
The good news is that what it tells us today can offer us insight into what’s coming next.
Fear Factor
Wall Street’s fear gauge is the CBOE Vix Volatility index, known simply as VIX. This index measures how nervous investors are about what might happen next.
Over the past week, it shot up to the highest level it’s been in five years.
Last Friday, it jumped more than 15 points to close above 45. That’s a level we haven’t seen since the first months of the pandemic back in 2020.
Yesterday, it went over 50. That’s still below the crazy highs of the 2008 financial crisis, but it’s a worrying sign.
Source: Yahoo Finance
Because when the VIX gets this high, it usually means something big is happening. Not just a regular sell-off, but something deeper.
Often, it’s fear of a recession.
But this time, it might be due to fears of a possible chain reaction across the financial system.
Because fear is spreading everywhere.
Hedge funds and other big players dumped more than $40 billion in stocks late last week, and the Nasdaq officially plunged into bear market territory earlier this week.
Meanwhile, the dollar was expected to strengthen once Trump’s tariffs came into effect. Instead, a sharp sell-off has weakened it.
And the bond market experienced its own massive sell-off before calming down a bit on Wednesday.
Source: Reuters
Both are still a major concern.
But what about cryptocurrencies? They’re supposed to be a safe haven in times like these.
And they have fared better.
In fact, bitcoin held up better than stocks during the initial sell-off and is showing signs of potentially decoupling.
While Solana just got major validation with a new “MicroStrategy”-like company focused solely on acquiring SOL.
But ETH has fallen off a cliff.
Source: CoinMarketCap.com
It’s down around 57% off its January high of $3,675.
Of course, the Trump administration insists that all this turmoil is just short-term pain on the way to long-term gain.
But all this uncertainty is hard to ignore. Until we see actual negotiations between the U.S. and other countries to resolve these tariffs, the markets are likely to stay jittery.
Yet it’s not all bad news…
How You Can Prepare for What’s Next
Amid the fear, there are signs of hope.
For one, retail investors aren’t running away. They’ve been buying the dip.
Last Thursday, they poured $4.7 billion into the market. That’s the most in a single day in over a decade.
And even though a high VIX might seem scary, history says it can be a good sign for long-term investors.
That’s because big spikes in the VIX have often come before strong stock market returns.
As Charlie Bilello noted in a post on X this week:
In fact, after similar fear spikes since 2014, the S&P 500 has averaged a 10.2% gain over the next five years.
In other words, times of peak panic can often turn out to be great buying opportunities.
I don’t think it’ll all be smooth sailing from here. The events of the past couple of weeks are like an earthquake, and there will be aftershocks.
But what’s coming could be especially promising for investors.
As you know, I believe we’re entering a critical phase of the AI boom: the final race to artificial superintelligence, or ASI.
The recent correction and all the volatility over the past month are setting the stage for the last phase of the current AI bull market.
And I’m convinced this final race to ASI will trigger a massive melt-up in certain AI stocks.
I went live earlier this week with an urgent online briefing to talk about what I see ahead, and I invited a special guest to join me.
His team has developed an incredible software that can help you avoid the losers and identify the potential winners in the race to ASI.
And not only have he and his team already flagged the potential losers…
They’ve also identified the top 10 stocks that could be the big winners.
I discussed all this with my special guest during the Final Race to ASI briefing.
We talked about his new model portfolio with his team’s top 10 AI stocks…
And how you could make up to 10 times more money from those stocks just by making a simple tweak to your investments.
All without dealing with options, futures or anything extra risky.
This presentation will stay up for a short time. You can watch it for free.
But I urge you to click the link below before my publisher pulls it down for good.
Regards,
Ian KingChief Strategist, Banyan Hill Publishing
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