Stocks higher, Next few weeks ! Possible ?
No better time than Now !
Is it time for contrarian-minded stock investors to show that they actually walk the walk.
Meaning? Contrarians often repeat the maxim “to buy when blood is running in the streets”.
If now is not that time, when is, really?
On Mon, 07 Apr 2025, US stock market (for that matter, global stock markets) is still reeling in the wake of Trump’s imposition of wide-ranging tariffs.
Based on past 5 days (as of endday 07 Apr 2025:)
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The Dow is down by -3,914.15 or -9.35%.
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S&P 500 fell by --535.28 or -9.56%.
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Nasdaq lost --1,618.29 or -9.40%.
This is not to deny that there are sources of concern, contrary to Treasury Secretary Scott Bessent’s “shallow and weak, assuming everyone’s a fool” assertion.
The possibility of a global trade war, the proximate cause of Thu, 03 Apr 2025’s market rout, is extremely worrisome. with China vowing to fight against Trump’s tariffs ‘to the end’. (see below)
However, contrarians’ core belief is that markets overreacted.
Therefore, buying when others are selling pays off more often than not.
To bolster any investor’s contrarian courage, consider the stock market’s historical performance in the wake of extreme pessimism on Wall Street.
MarketWatch’s Mark Hulbert (author of this post) measured that by:
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Focusing on the average recommended equity exposure level,
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Among a subset of several dozen short-term stock market timers that are monitored by his performance auditing firm.
This average (that is represented by the Hulbert Stock Newsletter Sentiment Index, (HSNSI) fell sufficiently enough recently to be within the 10% of lowest daily readings since 2000, (where in prior columns he has considered low enough to trigger contrarian interest). (see below)
The table above contrasts the S&P 500’s average return:
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In the wake of these lowest decile readings.
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Following the 10% of days in which the HSNSI was highest.
In true contrarian fashion, US stock market (over subsequent month & quarter):
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Performed significantly worse in the wake of extreme optimism.
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Than it did subsequent to periods (like now !),, where there was extreme pessimism.
The last time when HSNSI was as low as it is now, April 2025, was in late October 2023.
The S&P 500 (just for the record): (see below)
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Gained +10%, over the next month.
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Gained +19.1% over the next 3 months.
Buy when the blood is running in the Street ?
This historical perspective underlines the benefit of objectively measuring market sentiment, as the HSNSI does.
Few remember what bothered investors so much back then in October 2023.
Bothered they were:
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The factor that appeared to be concerning them most was interest rates.
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In October 2023, US Treasury’s 10-Year yield, rose to near 5%, its highest level since October 2007.
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That was when US bear market (2007-2009) had begun.
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Cue to the present, on Mon, 7 Apr 7, 2025, US Treasury 10-year yield ended at 4.15%, reflecting a slight increase from the previous trading day (see above)
The usual qualifications apply and sentiment is not the only factor that moves the US market.
One other thing to note, according to Hulbert’s research is “the contrarian analysis” is accurate only for the short term, usually up to about 3 months.
This is because the contrarian analysis tells investors nothing about where the US stock market will be later down the 2025 road and beyond.
Still, don’t be surprised if it’s higher over the next few weeks.
My viewpoints: (mine only)
Personal thoughts on US tariffs.
Putting it bluntly, the world did not take advantage of US per se and does not deserve the disruption.
Just because of spewed words from a statesman’s do not constitute truth, it must be backed by facts.
Challenges faced by US are all its own doings:
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For decades, the US has used “money & political influence” to maintain global ties.
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This approach come at a cost, including huge financial spending.
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Each administration contributed to its worsening fiscal imbalances, failing to keep budgets in check.
Thanks to DOGE ‘stupid’ unfiltered slashings updates, the world had a glimpse of the extent of US money-politics policies at play.
For Trump to claim that other nations took advantage of America oversimplifies the situation:
If true, it implies that past administrations (including Trump’s first term), were either (a) unfit to govern or (b) less capable than foreign governments. Which is it ?
There is a saying - there’s more than one way to skin a cat.
Trump’s tariff policies resemble a fishing strategy:
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Casting a wide net.
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Waiting patiently for reaction and to see what gets caught.
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How countries will struggle and negotiate, with US gaining the upper hand in the process.
There are always alternative ways to address US economic challenges, no?
US’s aggressive approach to achieving its "MAGA" goal has caused:
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Global supply chain disruptions.
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Other countries stock market to crash.
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US market to crash.
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Heightened anxiety among governments.
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Mass protest at home, over the weekends.
Despite this, there are reasons for optimism about US stocks in the near term as covered by this post. (see above)
Additionally, the resilience of US economy (for now) should support a rebound in equity markets.
Looking at US pre-market indicators for Tue, 08 Apr 2025 (see above), it seems to support Mark Hulbert’s hypothesis - agree ?
Case study - $Palantir Technologies Inc.(PLTR)$.
Between Thu, 3 Apr 2025 and Mon, 7 Apr 2025, PLTR experienced notable stock price fluctuations.
Its opening & closing prices for recent 3 days: (see above)
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03 Apr 2025 - Open ($81.25), Close ($83.60).
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04 Apr 2025 - Open ($80.07), Close ($74.01).
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07 Apr 2025 - Open ($66.65), Close ($77.84).
PLTR’s sharp price movements reflect (a) short-term volatility, with (b) increased trading volume esp. on 7 Apr 2025, suggesting heightened investor activity.
Despite the “recovery”, PLTR remains below its 50-day moving average of $91.84, indicating bearish short-term momentum.
Thankfully, it is still trading above its 200-day moving average of $57.71 suggesting long-term strength.
Analysts recommend a cautious stance due to concerns about overvaluation despite PLTR's growth potential.
Remember, just don’t get too sucked into it when US market “recovers” in the short term. Profit & Exit is the order of the day !
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Do you think US market will be on a recovery path for the rest of the week ?
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Do you think every country is to be blamed for US’s financial woes, no right ?
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