Market Movers & Shakers

Major U.S. equity indices were sharply lower last week following the unveiling of tariffs by President Trump on Wednesday, April 2nd on what he called “Liberation Day”. The President announced that the U.S. would impose a 10% tariff on imports entering the U.S. from all countries, which took effect on April 5th. Even higher tariffs were announced for countries the administration deemed to have engaged in unfair trade practices against the U.S., which are set to take effect on April 9th. The higher tariff rates included an additional 34% tariff on goods from China (on top of the existing 20% tariffs, hiking the tariff rate on Chinese imports to 54%), 46% on imports from Vietnam, 27% on imports from India, 24% on Japanese imports, and 20% on European goods. Notably, Canada and Mexico were not subject to reciprocal tariffs for goods compliant with the prior United States-Mexico-Canada Agreement (USMCA). Some of the goods not subject to reciprocal tariffs included copper, pharmaceuticals, semiconductors, lumber, certain critical minerals, and energy products. The market selloff intensified after China announced that it would retaliate with a 34% tariff on all U.S. imports starting on April 10th.



Source: CNBC, The White House



Source: FactSet

Last week, the S&P 500 declined 9.08%, the Russell 2000 fell 9.70%, and the Nasdaq plunged by 10.02%, marking the worst week for major U.S. equity indices since the COVID-induced market crash in March 2020. The Nasdaq and Russell 2000 also technically entered bear market territory, down more than 20% from their highs. The S&P 500 experienced its worst back-to-back trading sessions since June 2020 on Thursday (-4.8%) and Friday (-6.0%), declining 10.5% over two days. Per the Wall Street Journal, the U.S. stock market shed $6.6 trillion in value over Thursday and Friday’s sessions, a record two-day wipeout. The biggest two-day loss in market capitalization before last week occurred during March 2020, when $4.4 trillion of stock market value evaporated in the two days ending March 12, 2020. All sectors of the S&P 500 closed in the red last week. Energy, Information Technology, and Financials were the biggest decliners while more defensive sectors like Consumer Staples and Utilities held up the best from a relative standpoint. The Magnificent Seven were all lower last week, with weakness in shares of Nvidia, Meta, and Apple.



Source: Bloomberg Finance LP, Deutsche Bank

Market breadth has notably weakened. Just 11% of stocks in the S&P 500 remain above their 50-day moving average while less than 23% of stocks are currently trading above their longer-term 200-day moving average. The weekly RSI (Relative Strength Index) of the S&P 500 fell to the third lowest reading in the past 20 years, only to be surpassed by lower RSI at the Covid lows (March 2020) and the Great Financial Crisis (2008). Equity market volumes have been exceptionally high, exceeding the levels observed in March 2020. According to data from Cboe Global Markets, put option volumes across stocks and ETFs hit an all-time high in Friday trading. Volatility surged last week to the highest levels since the depths of the pandemic. The VIX spiked more than 100%, the 3rd largest weekly spike on record, and closed above 45. Sentiment is also very washed out. The CNN Fear and Greed Index, which can be used to gauge the “mood” of the market and is measured from zero (extreme fear) to one hundred (extreme greed), recently fell to 4 out of 100, one of the lowest readings ever recorded.



Source: FactSet

U.S. High Yield credit spreads—the risk premium investors demand to hold riskier debt—widened by more than 100 basis points on Thursday and Friday, reaching approximately 4.5%. In general, tighter credit spreads signal greater investor confidence or risk appetite, while wider spreads reflect increased market stress or fear. The blowout in spreads marked the largest 2-day move since March 2020. However, it is worth noting that at current levels high yield spreads remain below their 30-year average of roughly 5.25% and are far from pricing in a wave of corporate defaults or recession. Treasuries rallied sharply in a flight to safety move, though came off their best levels after Fed Chair Powell made comments on Friday that were perceived as hawkish. The yield on the 2-Year U.S. Treasury bond fell roughly 25 basis points last week, briefly dipping below 3.50% for the first time since March 2023. The 10-Year U.S. Treasury yield also fell around 25 basis points on the week, touching 3.86% at its lows on Friday. Market expectations for the Federal Reserve to cut interest rates this year have risen significantly as tariffs ignite fears of a global economic slowdown. Based on overnight interest-rate swaps, markets briefly priced in 125 basis points of easing by year end, equivalent to five quarter-point moves. At the peak of selling, markets were also showing a nearly 40% chance that the Federal Reserve would step in with an emergency 25 basis point rate cut before its next scheduled policy decision on May 7th.

Gold hit all-time highs earlier in the week before finishing down 2.5%, lower for only the second time in the past 14 weeks. Historically a safe haven for investors, Gold held up well in Thursday trading before falling by nearly 3% on Friday, a sign that forced selling likely took place as correlations across asset classes moved toward one. In contrast, Bitcoin, which is generally perceived to be a more “risk-on” asset, was essentially unchanged on the week amid the broader selloff. WTI Crude Oil prices fell 10.6%, the largest weekly decline since March 2023, posting its lowest close in nearly four years following an unexpected output hike from OPEC+ and amid global growth concerns. Looking ahead, earnings season kicks off on Friday, with several major banks set to report results. Analysts and market participants are anticipating that companies may look to suspend forward guidance given the uncertain macroeconomic environment and lack of clarity on future global trade policies, potentially pinning volatility at an elevated level.

Updates & News*

Recent market volatility has provided us with plenty of opportunities to put cash to work across new accounts and accounts with recent deposits. Considering the current market environment, a quick refresher on how Tandem invests new money may be useful to readers and listeners. At Tandem, we transition new money into our strategies over time rather than all at once. Guided by our math-based, quantitative investment process, new money is invested on a stock-by-stock basis as we build out the portfolio one company at a time. In a normal market environment, the typical transition takes between three to six months. However, during periods of elevated volatility, the transition period may accelerate to a matter of weeks — or in the case of March 2020, days. On the flip side, during market melt-up periods where volatility is near record lows and valuations are becoming stretched, the transition period may decelerate and take every bit of six months or longer. By transitioning new money this way, we seek to remove the burden of timing from our clients’ plates and place it firmly onto our own.

It is important not to get Tandem’s transition process confused with dollar-cost averaging (DCA). The typical DCA invests a fixed amount of money at regular intervals, say every second Wednesday of the month, regardless of price. In other words, DCA strategies are inherently price and valuation indiscriminate, which at times results in overpaying for a particular asset. In contrast, Tandem’s transition process seeks to build out positions one stock at a time paying prices our process suggests are reasonable to pay along the way. As a result, Tandem’s transition process is highly price discriminate. At Tandem, we believe that the price you pay for an asset—in this case shares of a company—has a significant impact on the total return of the investment over the long run. After all, “buy low and sell high” is often the first bit of investment adage we all learned, right?

New accounts and recent deposits that have been under Tandem’s management for a week are already nearly 50% of the way invested into our strategies. By the one-month mark, new money is roughly two-thirds of the way in line with our strategies, and by the three-month mark new money is approximately 90% of the way invested.

Source: Source of all data is FactSet, unless otherwise noted.

*The transition level activity taken by Tandem is applicable to new accounts and new money, not the composite or firm-wide level. New accounts and new money are not automatically invested on the first day. Rather, they are transitioned into our strategy over a longer time period that is dependent upon market conditions. Strategy level activity is applicable to the composite and action is taken at the firm-wide level.

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Disclaimer: Tandem Investment Advisors, Inc. is an SEC registered investment advisor.

This audio/writing is for informational purposes only and shall not constitute or be considered financial, tax or investment advice, or an offer to sell, or a solicitation of an offer to buy any product, service, or security. Tandem Investment Advisors, Inc. does not represent that the securities, products, or services discussed in this writing are suitable for any particular investor. Indices are unmanaged and not available for direct investment. Please consult your financial advisor before making any investment decisions. Past performance is no guarantee of future results. All past portfolio purchases and sales are available upon request.

All performance figures, data points, charts and graphs contained in this report are derived from publicly available sources believed to be reliable. Tandem makes no representation as to the accuracy of these numbers, nor should they be construed as any representation of past or future performance.