We know the saying: "Buy the rumor, sell the news."
The idea is that the rumor about something good is likely to give you a nice entry point, but the reality is always going to underwhelm -- so it marks a selling point.
April 2nd, however, appears to be framed as a peak "bad news" event.
So, maybe things are reversed: you should finally buy after the news event has transpired. Let's look at the possibility.
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1 The Three "Teams"
Some time back, I argued that there were three camps in the current market.
Team Bull: these are people who look at slower moving data and think our economy is fine. This includes Howard Lutnick, the Commerce Secretary.
Team Finite: these are people who think that there is a problem facing the economy, but that it will be transient. This includes Treasury Secretary Scott Bessent.
Team bear: these are people who hold that the tariffs make our economy fragile ... and that it was already fragile, so that the S&P 500 will see a 20%+ decline.
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2 Team Finite
If you think the April 2nd "Liberation Day" marks a period where all the significant bad news is in, then you are part of "team finite."
But there are two realities here.
As @qthomp points out, the administration could start small and ramp up later or go big and then cut.
If you think that April 2nd is the worst of it, then you are in the latter camp. And that's not a certain outcome.
3 Team Black Bear
I don't think that's right. I do hold that enough of the market will be pleased with the April 2nd announcement that we're likely to see a bounce.
But longer term, the unexpected effects of DOGE cuts and broader macro fragility will cause the market to decline into a "bear" like condition.
Currently, I'm team black bear, however. I think it'll be relatively mild, when compared to 2008, for example.
4 Team Grizzly Bear
Some, however, are team grizzly bear. They hold that there are myriad factors that will negatively impact the market, including canceled contracts at a federal level that will have knock-on effects at the state level, and the geopolitical implications of imploding NATO, which will reshape the global safety order.
For this team, we are facing a situation as bad as 2008 and the Federal Reserve, which is looking at slow moving indicators, will be too late to prevent the worst of it.
5 Who's Right?
I am, obviously ;)
If you look at the CME Fed Wach Tool, then you'll see that bond traders have currently priced in five interest rate cuts through the end of 2026. Previously, they had priced in 2.
The reason for that increase is simple: they foresee a deteriorating macroeconomy. The weight of betting markets favors some sort of recession, then, but not a grizzly bear recession at this point.
6 How To Moon In A Bear Market?
It's harder. You can short -- but only do that if you have the pertinent skill and experience.
Otherwise, you can buy $PAXG or $XAUT -- version of gold. And you can buy various versions of yield bearing tokens. $sDAI now offers better returns as $USDS, and you can combine that with other yield bearing tokens such as $usd3 in liquidity pools for even higher fee gains.
I know, 10% - 25% yields won't change your economic situation this year. But it's better than losing 80%+ of your portfolio.
DYOR. NFA.
Happy Trading!
-Sebastian Purcell, PhD
