Introduction
Global markets in March were dominated by one thing: Trump’s Tariffs. This theme will be central to this report as we review the impact of both policy uncertainty through March (as POTUS flip flopped near daily on the tariff agenda) and early April’s “Liberation Day”, where (alleged) reciprocal tariffs for all US trading partners were confirmed.
As one might imagine in such circumstances global markets sold off sharply with, rather surprisingly, Bitcoin (and some other blue chip cryptocurrencies) showing most strength amongst the carnage.
Given the significance of events in the last week, a slightly different format this month to concentrate on market fallout and look at where we might be headed through Q2.
Summary of Major Equity Markets
United States
Are you not entertained? I think it’s safe to say investors have had a difficult time through March and early April as the impact of US policy decisions started to hit markets. The S&P 500 was down 7.7% by mid month (March 13th) before a recovery bounce of 5.13%. It ended the month down 4.31% from there for an overall drawdown of 7.38%. Then, capitulation on confirmation of the US tariff position with the first 4 trading days in April bringing a 9.9% drawdown, -15.05% from the March open and -17.53% from the February highs. $6,147 to $5,069 in 32 trading days. Impressive.
As usual the Dow followed a similar trajectory, down 6.55% in March, -13.1% from March open through the first 4 trading days in April and -15% from the February highs.
The Tech heavy NASDAQ was worst hit in March, down 10.44% in total through the month, -17.11% from March open to April 4th and a whopping -21.71% from February’s highs.
Small caps in the Russell 2000 posted an 8.75% loss through March, extending to -17.63% through April 4th. The struggling index has had a bad year overall, already breaking down since late November 24 with an overall drawdown of -27.97% from the highs.
Overall this was a pretty terrible month for investors, both in terms of index linked and individual stock portfolios as markets looked to risk off in light of global trade war escalation by POTUS.
In a bit of a deviation from major equities I’ve included the DXY chart in this section as I want to signpost the confluent movement here, in terms of $ strength. DXY suffered a 5.85% drawdown through the month, settling at around -4.5% on April 4th. From a technical perspective it didn’t break range lows on the weekly scale so remains in Bullish trend for now, but I wanted to mention this here as I think it one of the key drivers for current policy.
In a nutshell, I believe Trump wants USD weaker and oil price falling (to counter inflationary pressure from tariffs on US goods and services), at the same time as forcing the Fed’s hand to reduce interest rates (and the 10Y yield) in time for the US public debt refinance cycle ramping up. I think POTUS is of the view that liquidity is required sooner rather than later to avoid a full on economic recession (though I still believe we see a technical recession based on my model) and that refinancing the debt at lower rates would, quite rightly, be beneficial to future economic policy.
To get to that point, short term market pain is likely.
This is quite the deviation from the normal market update, but I think it important to add for context as, amongst the panic of the last week, I’m of the view that nothing has broken structure (other than the Russell) from a technical perspective yet and this pain, in my mind, remains temporary. If the Fed bites, which in fairness comments on Friday by Jerome Powell suggest they’re not ready to do just yet, then recovery could be swift.
Long story short, this is a “Political & Regulatory Risk” event (one of the categories I covered in “Escape the Wealth Illusion”). It’s not the time for long term investors to panic, which generally leads to even worse outcomes.
United Kingdom
This will be a common theme, but after posting 3 new ATH’s in January, February and the first trading day of March, the FTSE 100 reacted alongside US equity markets to tariffs, down 4.3% through March then giving up a further 8.07% post liberation day. Overall the FTSE is down 10.54% from the March high and one would have to anticipate a new ATH for a fourth month in a row, April, highly unlikely.
Europe
Same story in the Eurozone with the EU50 down 13.56% overall through early April. Same reason so no point flogging a dead tariff horse!
Japan
Same story here too with the TOPIX down just over 10% and the NIKKEI down 16.44%.
Overall, equity markets don’t like trade barriers and Trumps Trade War (whatever his reasons) has initiated the type of selloff one might have expected across Risk assets. In my view, certainly at the moment with the technical data I’m looking at, that this is most likely transitory and we see a sharp move off the bottom, once that bottom comes. Something similar to the Covid recovery, potentially. There are technical levels I can’t accept being breached, but on the major indexes (and in Crypto) this hasn’t happened for me yet so I’m exercising patience rather than taking market timing risk.
Bond Market Dynamics
US Treasuries
We’ll focus solely on the US this month as the US10Y is, in my opinion, one of the key drivers for the tariff agenda. It’s too high and POTUS, along with his (former hedge funder) Treasury Secretary want it lower before the US starts to refinance its debt later in the year.
In March, there wasn’t really much to write home about from a 10Y perspective. It opened the month at 4.24% and closed it at 4.203%, for a change of -0.87%. So, pretty stable. But following the tariff announcements in early April yields tanked in line with the DXY selloff, down 8.47% to a low end yield of 3.86% before settling at close of play Friday 4th of April at bang on 4.0%.
The 2 Year (3.64%) and 5 Year (3.707%) followed similar patterns through March and early April.
So, yields across the board fell in reaction to the tariff news and if one surmises that reduction in these yields is one of the fundamental goals of the new administration then their plan, on the surface at least, seems to be working. I think this is a positive trend, but as a technical trader I’d like to see these yields break their bullish structure. The 2 Year wicked through it’s structural low before settling back inside (and in my process only a closure on the mapped timeframe confirms structural break), but as you can see the 5Y and 10Y are comfortably inside of their long term upside consolidation ranges.
Why do I want to see a structural shift technically? Well, it likely only happens with Fed cuts of their base rate and that, my friends, is what I think POTUS is trying to force the Fed to do. Such a cut in rates, driving reduction in yields on the back of reduced confidence in the US economy due to tariffs would historically be net negative for currency (Risk Off) and net positive for asset markets (Risk On). It’s also net positive for my global debt refinance cycle thesis shared earlier in the year (https://wosscapital.com/liquidity-risk-and-the-debt-refi-trap-2025-market-musings/).
Cryptocurrency Market Trends
This is going to be really dull for members of our Discord as I find yet another way to say “no change” when it comes to Bitcoin and, by extension, the Cryptocurrency market. I see daily flip flopping of opinion on X, one day the cycle top is in and the next we’re going to the moon. While I respect that everyone does analysis differently and short term traders have a completely different time horizon to a (predominantly) macro position trader like myself, it does make me worry for the less experienced and how they action their own positions based on what they see.
So, let me make my position very simple for the avoidance of all doubt:
I think Bitcoin is currently in the fifth wave (Elliot Wave) of a macro set that began in December 2018. I think the previous 4 Year Cycle (how Bitcoin is traditionally mapped) encompassed waves 1-3 of that Elliot wave set with the top of 3 coming in April 2021. Wave 4 then encompassed April 2021 to November 2022 (84 weeks) before the final 5th wave started. Inside of that final fifth wave we have a clear 1-4 structure, with a missing (final) fifth wave at tertiary level.
The charts below show both the secondary Elliot Structure (Yellow) and the current Bitcoin Trading Range at a weekly level. The second shows the tertiary structure inside (Pink) as I think most likely. You can surmise yourself from both how they fit together in terms of technical structure from a trend perspective and technical structure from an Elliot perspective.
At this point in time, for me, Bitcoin is still where I would expect it to be and actually, having already mostly completed it’s fourth wave prior to tariffs being announced, has held far stronger than equities and other risk markets. Why? Because they had more room below to drop without breaking anything.
For me, the invalidation point for this thesis is clear. Any move below the current low at $76,600 and the ABC count for a tertiary wave 4 is invalidated and I must revisit, as one must always do with new data, the structures. While Bitcoin remains above this level it’s still in the premium (top half) of its weekly macro trading range (by trend) and still fits as a 4th level (quaternary) wave 1 impulse starting out.
So, at the moment, nothing changed. We’ve been in this structure for nearly 75 months so far (6 and a quarter years) and there’s no clear invalidation of it yet right down to quaternary level. The macro trading range remains well intact, the current low at $49,577 (though I certainly wouldn’t be basing my risk off that given the size of the range, anything below the previous range high and equilibrium point of $73,700 ish is my line in the larger bullish trend sand, outside of Elliot).
Outside of Bitcoin the other majors that interest me like XRP and ADA are also still well within trading range and in keeping with larger structure. These lend correlation to the Bitcoin point.
Is risk increased here? Absolutely, and that’s why clear, logical invalidation criteria and the actions one will take if they are breached are so important in this game. But has anything broken yet in the crypto (or equities) space? No, no major structural breaks (or invalidation points) have triggered. So………..I wait, patiently.
As Buffet said, markets are a tool to transfer wealth from the impatient to the patient. Have rules, follow them and be patient. Act only when action is beneficial, objective and rules based, never when driven by emotion and particularly when that emotion is fear.
I’ve been in this markets game a long time and two things are almost universally true:
- Bull Markets/Phases don’t end in fear, they end in euphoria.
- Bear Markets/Phases don’t end in hope, they end in fear.
Following the worst Q1 in Bitcoins history and the recent drawdowns we’ve covered in equities above, we’re in deep fear territory here and haven’t seen euphoric sentiment in markets for quite some time. So, can we go lower? Absolutely, anything is possible. Is this the end? Not yet, in this traders opinion, the more probable outcome here is a final high across risk to bring back euphoria followed by cycle tops that catch the most amount of people offside, as always.
Emerging Risks
Kinda feel like repeating myself here as nothing has really changed since last month, other than some clarity around the tariff position. This remains the key risk
Geopolitical Tension
Trade wars are heating up, with consumers likely to bear the brunt through inflation if these tariffs stick long term (personally I think they’re bargaining chips in a different game).
There’s also the continued tension around Ukraine, with Trump trying to manufacture a peace deal by threatening the removal of US support unless Ukraine agrees to a mineral deal with the US. Escalating tensions with Canada and Greenland sit alongside those of pretty7 much every country globally (including a rock outcrop that homes only penguins!) which have fallen foul of the Trump Tariffs.
Inflation Concerns
Service sector inflation and tariff effects pushed U.S. CPI higher, with global spill overs evident in Japan and the UK. Rate cuts remain elusive in the US with Jerome Powell saying recently, in response to Trump, that they were in no hurry to cut. Recent labour market numbers support his rhetoric here and suggest we may see a longer term faceoff between POTUS and Fed Chair. H2 2025 still looks plausible for recession as consumer spending weakens and debt refinancing begins to ramp up.
Currency Fluctuations
The USD collapsed on tariff news came out last week. A slight rebound into Friday close gives us something to watch as April progresses. Ideally we’d like to see a continued weakening Dollar to help provide liquidity to asset markets as the global debt refinancing cycle begins in earnest into Q2/Q3.
Assets of Interest Moving Forward
- Gold: As a hedge against inflation and currency volatility I’m starting to look more and more at gold as a replacement for my fixed income allocation for the long term. I think through 2025 and beyond I will be moving out of debt and into precious metals as a higher yield, lower volatility play, as crazy as that sounds, for the longer term.
- Cryptocurrency: Bullish outlook holds as explained above, with Bitcoin eyeing $120k+ post current retracement and altcoins targeting a $2.5T–$3T market cap. For me those projects announced as part of the US Strategic Reserve make the most sense and I positioned here long ago. I don’t have any SOL (as a matter of personal preference) but I do hold XRP, ADA, XLM, DOGE and BTC. I expect positive tailwinds for these coins into H2 this year.
Potential Portfolio Adjustments
Nothing much changing here either for me, though with a weakening USD ($) I’m less concerned with currency hedging this month. Actually, those external to the US buying US markets in their local currency potentially gain from a weakening $ here. That said, those (like in Cryptocurrency) selling back to $ before a ForEx conversion later likely lose out as USD weakens against their local currencies. For those folks it may be worth looking at selling directly into local currency, if the maths works in your favour.
Sector Rotation
Utilities and healthcare gained again and defence sectors (particularly arms manufacturers) are starting to look bullish in Europe. Germany deciding to build tanks again isn’t a great sign historically, but it presents opportunity in some EU based sectors.
Cryptocurrency
If you have an appetite for high risk, increasing allocation slightly and targeting U.S.-based altcoins with regulatory tailwinds may be a reasonable play for the remainder of 2025. With ETF’s on the horizon, SEC cases being dropped near weekly and the incoming administration adopting a positive stance on digital assets the risk/reward for sensible plays here is favourable in my opinion.
Equities & Risk On
In case I haven’t said it enough! I think we have 3-6 months in this bull trend across the Risk On classes. My personal taste, for now, is to continue to allocate the majority of my capital here (along with cryptocurrency) and milk as much return as I can before I anticipate becoming more defensive later in 2025. I’ll review this again at the end of Q1.
Looking Ahead: What comes in Q2?
Tariffs, Tarradiddles (petty lies) & Trade Wars. I think that’s the short summary!
The slightly longer version echoes my thoughts from last month as some of what I mused then has begun to play out. Tariffs have been implemented and we should have a little more detail on how Trade Wars with Europe and the UK (and all those other countries!) might play out going forward in the next few weeks.
I still think Trump is trying to “pull a Reagan”, the republican president generally thought to have had the best economic record of our times. This was achieved mainly by tanking the economy (and markets) early in the term where it was easy to blame the previous administration (as we’re seeing constantly!) by using the levers he had available to him as President without the need to pass laws through Congress.
As he starts to lay the foundation for his economic policy through these law changes later he can recover by mid terms and the latter part of his Presidency to great acclaim. This theory does play with my H2 fears for this year and in the context of what we see from the White House at present is something of a concern. It obviously doesn’t play too well with my 6 months remaining Risk On thesis though!
Time will still tell.
Having heard more detail though, I do at least think he has some sort of plan now. I may not agree with the route he’s choosing to get there, but if the rhetoric and analysis around it is true: he wants a lower DXY, lower Oil price and lower Fed Funds Rate quickly to positively impact debt refinancing (FFR/DXY) and protect against consumer inflation (Oil) then I can, to some degree, see the logic.
I have long held the view (backed by my modelling) that the US will enter a recession at some point in the mid term. I think POTUS and his team know that too and I think this play is one of the few things he can do to ensure that remains a technical recession only (a couple of quarters of negative GDP growth), rather than an economic one which sees longer term impact to the US economy.
For what it’s worth (and I’m joining a lot of dots here) I think that makes sense. A short technical recession would certainly be preferable to a long economic one and, with the soft landing having been pie in the sky for a long time in my view, cutting rates now (or in May) would be sensible. I’ve said before I think the Fed are late, but they still have time if they act relatively quickly. If they do, this would be good for the US economy overall, but from our perspective also good for Risk markets.
Spotlight: When Reciprocal means Unilateral!
A short, sharp spotlight this month continuing our tariff theme. I want to take a quick moment to explain the “tarradiddles” part of my title!
The narrative from POTUS (and his administration) was that tariffs applied to each nation around the globe were “reciprocal”, meaning that the US were only applying tariffs to countries that already applied tariffs to US imports themselves. The tariff sheets even made a big play around how the US were being generous by only applying half the tariffs that those countries applied to the US.
In politics, perception is reality and when you want to gain support from your base you can stretch the truth as you see fit, a base who will rarely question what you say even if they did understand how tariffs work in general (which they mostly don’t as we’ve seen by so many thinking the exporting country pays them, rather than the local consumer).
So, what’s the truth here? Are these US tariffs actually half of the tariff applied by the recipient country? Are they reciprocal as claimed?
Well, as with most things politics, no, not at all!
The calculation used here (and this tracks for every single country) was: Trade Deficit with US / Imports To US. That’s it. Nothing to do with tariffs at all, like zero. No relationship to them anywhere. Simply US Trade Deficit / Imports to US from each country.
It was pretty humorous when I saw it, in that most of America actually seems to think these are the tariffs applied by these countries (including one uninhabited rocky outcrop where only penguins reside!!) and that POTUS would have the brass neck to stand there and actually try to sell it. I mean, it’s actually quite impressive!
As funny as it is though, a little note of caution from me as I started to think this through. As any sensible person understands any tariff is paid by the local importer in the importing country and, generally speaking, finds its way to the consumer in the form of local price inflation. It’s a tax applied and collected locally, not applied to the exporting country. There are plenty of good reasons for having tariffs on certain products, you may want to protect local industry for example, but blanket tariffs on all goods are simply an increase in local taxation, if they’re ever really applied.
Now, with this in mind we’re already seeing nations around the world retaliate with their own blanket tariffs on US imports. Countries who have their own internal government deficits, struggling to raise more capital and don’t want to be seen to be taxing their citizens any more. It would be very easy, for example, for the UK Labour party to apply “reciprocal” tariffs on all US imports, because that would be an increase in local taxation in the UK and allow them to fill, at the expense of their own citizens, some of the “black hole” we keep hearing about. And because the complexities of trade tariffs are little understood by so many they wouldn’t be harangued for tax increases because they could simply blame Donald Trump. “The price of your goods have gone up because of Trump, sorry” when in reality they are the ones on the take.
Cynical? Yes. But I could see it being used as an opportunity by folks like Labour to bring more into the public coffers in their own country and point at Trump as to blame because the general public have no idea how tariffs work or who actually pays them. So, let’s watch out for this!
Conclusion
We got some clarity in early Q2 that helped with the uncertainty markets had been posturing through March. Recession risks still loom larger as tariffs and trade wars reshape the economic landscape so patience, flexibility and vigilance will define success in this volatile year.
Build your plan, know your invalidations, execute without emotion.
At times like these we see massive swings from week to week in sentiment, with a fear & greed index that’s almost bipolar. Markets live to suck the life out of you, to make you irrational and to feed off your bad choices. As one of the greatest investors the world has ever known said: “Markets are hugely efficient at transferring wealth from the impatient to the patient”. And in the words of another: “There’s a time to go long, a time to go short and a time to go fishing”. For me, I’m at the watering hole with my fishing rod. Vigilant, yes, flip flopping between macro thesis on a daily basis, absolutely not.
The hard work is done, the positions are set, now I wait for target or invalidation. Patience.
Tariffs may or may not follow through and IMO they are simply a negotiating tool in a larger game. Can POTUS make the Fed cut in May (as they should) and will this herald the final push in asset markets following the major drawdown thus far this year. We don’t have long to wait to find out.
Overall though, try not to be swayed by emotion. Cool heads will prevail. I don’t profess to be infallible, I get plenty of things wrong, so if our outlooks differ that’s absolutely fine. But if you are going to make different calls, do it with data, to rules and for well thought out, logical, objective reasons. Don’t trip yourself up with fear (or greed), leave the emotions at the door and execute to your rules.
“Lang may yer lum reek.”