In today's episode, Tyler examines today's stock market action and, perhaps more importantly, what we can expect from J. Powell and the Federal Reserve tomorrow. He also discusses the impacts of recent economic data and tariff talks and explains why the market's movement around these events is crucial. Tune into today's podcast to learn more.

Don’t look back because the market is closed. Good Tuesday afternoon everyone. Tyler Herriage here with you for today’s VRA Investing podcast. Hope you all had a great day out there today. It was a, a rough day for our markets day after, you know, in future trading this morning, markets were flat, a few little positives here and there, but after the open couldn’t hang on to those gains. So we finished lower across the board here today after we just saw the first days of back to back gains for the S&P 500 Friday and Monday since the February 19th all time highs. We wanted to see that continue. We, we want to see some momentum being built from here.

[00:01:01]:
If you tuned into Kip’s podcast yesterday, you know, I think he really nailed the theme that we’re looking at here and we talk every day at the market close ahead of these podcasts and so we’ve got a few updates along the way. But you know, yesterday’s action to recap that just here for a quick second, we saw as a bit of a pattern change here. You know, going into, you know, Trump’s first month in office, even before the all time highs, we had seen some sessions where we got some seemingly good news whether it was earnings, economic or otherwise. And the market didn’t really treat it like great news.

It wasn’t necessarily bad, but just didn’t quite get the pop you might expect on good news. Then we started, it started to get a little worse right where you just don’t want to see good news becoming bad news. And we saw a little bit of that now, at least from what we saw yesterday. That was a little bit of a pattern change where we got weaker than expected retail sales, New York Fed Empire State Manufacturing survey. Now that that’s soft data but big drop there. Housing market index falling off in March as well and missing expectations of a flat reading recently too. So despite that news, the markets had a great rally yesterday and I which I considered particularly impressive considering almost none of the Magnificent Seven participated in yesterday’s rally. So you know, in the extreme short term here, we want to see last week’s lows holding.

[00:02:42]:
So today’s action didn’t help us there but again makes tomorrow’s FOMC meeting and, and Q A from Jay Powell more important than ever. I’ll try to recap this here quickly because I know Kip covered this a lot yesterday as well. But the writing’s on the wall here for the Fed to at least appear a little bit more dovish. They don’t have to give a deadline for when the next rate cut is going to happen. But, but even if it’s only one line in the announcement and then one that he repeats during the Q and A that has a dovish hint to it, I think that will be enough for this market. And if the Fed really is data dependent like they say they are.

Time and time again, you hear it all the time from the Fed. I mean, people thought they weren’t going to cut rates last year, right. That, that close to election because it would seem political. It didn’t seem to bother them then we know that the Fed leans heavily dim. But when it might benefit Trump, they got to remain data dependent.

[00:03:45]:
But they’ll keep saying data dependent no matter what’s going on. So if they’re looking at the data, here’s. I just said some slow economic data that we got back yesterday. Here’s the latest updates from the Fed’s own data here. Let’s take a quick look at this first one. The Atlanta Fed, their GDP now model now forecasting first quarter negative growth of 1.8%. You know, that’s slightly better because they got down, what was it, negative, 2.1%. So it’s bouncing back up there.

But I mean, look, we were just at what, 1, 2.1% growth, 2.3% growth not long ago at all. All right, so this is the Fed’s own data here. Again, if they’re data dependent, what does this tell them to do? That they need to cut rates. And one more bonus thing that we think we’ll get some more on tomorrow. So stay tuned. I’ll get to that here in just a second. The second piece of data here, the Cleveland Fed has their now their inflation now casting service, which has this is for March. The projections here.

[00:04:50]:
This is the month over month data. As you can see, the year over year data is where it really gets interesting. Sorry. Let me make sure you can see that there. So, yeah, no, thanks. The inflation year over year change, right? CPI coming in below 2 1/2 percent. Core CPI coming in at a 2.99. Now you might be saying, Tyler, why is that a big deal?

The Fed’s target is 2%. That’s still above it. How can they be cutting rates with inflation above it?

This would be the first reading of inflation on core PCE below 3% since April of 2021. That’s a huge move lower in inflation. And again, this is the Fed’s own data forecasting disinflationary trends here and if you look at truflation, we’ve talked about this one here as well, which is some look at as a wider, more expansive look at inflation. It’s in the ones.

[00:05:55]:
So again, based off the Fed’s own data here, they at least need to start getting the dovish comments out there because Jay Powell does love to telegraph for the markets, but we also have to remember he does not like Donald Trump. President Trump, we learned that from the James O’Keefe release from one of, you know, his underlings at the Fed saying he doesn’t like Donald Trump. So even outside the Fed, Fed though we are seeing analysts lower their expectations for S&P 500 projections. We’re also seeing lower earning expectations coming out from companies. Now, there is a flip side to that because we’re not bearish on this market, we’re not bearish on this economy.

So one advantage here for companies lowering their consensus estimates. Or just their estimates for future growth, it makes it much easier to beat to the upside in future earnings releases.

So that will be actually a bullish theme to come back around a tailwind for us later. So again, based off the Fed’s own data, based off of other economic data and analysts, what we’re seeing here is that an economy that does appear to be slowing, we don’t think it’s going to be recessionary. Right. I’ll repeat that here, but, but more of an adjustment period from the Trump administration into or from the Biden administration into the Trump administration.

[00:07:20]:
We’re going from a government le economy for the last four years under Biden to now a private sector growth or where we expect growth to come from the private sector. So a 180 like that is not going to be without adjustments.

And again, bottoms are messy along the way. Not necessarily saying the lows are in, but again, we remain extremely bullish on this market over the medium to long term. And again, the writings on the wall here for the Fed, tomorrow could be a pivotal day. You know, and another topic that would be doish for the Fed to talk about that I mentioned earlier is the end of quantitative tightening. You know, a lot of people forget that they are still in the process of quantitative tightening here. They’re sorry, contracting their balance sheet monthly right now. So not saying that we need to get back to qe, you know, but level that off a little bit until we have future data.

[00:08:17]:
If they’re saying staying data dependent. So we’ll see. You know, Jay Powell has a terrible track record. We can’t forget that, of course. Numerous instances of policy errors, December 2020 or 2018, what we call the December from hell, which culminated in the Christmas Eve sell off bottom for the market. You know, then during COVID he gave the government a blank check to do whatever they wanted with.

And that’s his infamous 60 Minutes appearance where they ask about creating dollars. He’s like, do you, you don’t even have to actually print them anymore. You just on the computer digitally create them. We just saw Elon Musk talking about this, that whatever department he was Investigating has essentially 14 computers that are money printers, Right. That they can just send out amounts from. It’s, it’s, there’s too much to cover in just a quick podcast here today.

[00:09:15]:
So, but back to what we’ve seen from, from Jay Powell, again, the whiff on in December 2018, the, the blank check that he gave the government during COVID And then, you know, it wasn’t even that as bad. It was as bad as the transitory call on inflation, which he waited too long to raise rates on, which spiked inflation even further. Told the government to keep printing money, also making inflation worse. Huge whiff on inflation. Again, transitory huge whiff. Then he held rates too high for too long.

Which has slowed our economy some. So, you know, this is an interesting time here for Jay Powell. Interesting time for the market because we have a setup here for a potential move higher. We are still in oversold territory, really, across the board for our markets. Seasonality here is flipping from bearish to bullish. We talked about how strong the second half of March and really into April’s a strong month as well. You know, as we approach the end of the quarter here and the end of the month, we do expect to see some front running of what will be, you know, fund flows that we talk about here often that come specifically at the beginning of a new quarter, then the next round of earnings. And as well for this market, we’ve also got investor sentiment at extreme fear on just about every metric, really.

[00:10:35]:
The fear and greed index now at still at a 20. I believe this is one of the longest streaks in extreme fear mode in the last few years.

Worse than some of. Some of these readings are even worse than the 2022 bare market in some cases. So after tomorrow’s Fed meeting, though, which we’ll be reporting on here again, we expect some kind of a dovish hint from Jay Powell in it. But after that, the other thing that has been disrupting the market, of course, it’s been all over the news is tariffs.

And we’re still approaching just two weeks away from that April 2nd tariff deadline. This is a tough topic to cover quickly here on the podcast because there’s so many different facets to it. But I’ll try to give a quick recap in addition to what Kip has already covered on the podcast. Again, Kibbutz said this as well. We continue to find it hard to believe that Trump and team are not paying attention to the market. We would probably call, you know, try to call their bluff on that one. Really, you can say it all you want. We know Trump watches the market like a hawk.

[00:11:43]:
And so we’re looking at this tariff situation as a potential sell the rumor, buy the news situation, where the rumor is, right, that these tariffs are chaos. They’re going to be all over the place. They’re going to be implemented on April 2nd and it’s just going to be mayhem.

We don’t see that as the most likely outcome. Yes, the messaging has been terrible so far, but if this still is anything like Trump 1.0 on tariffs, he’s using April 2nd as a negotiating tool here.

Where we would expect that it’s forcing countries to come to the table and negotiate that by April 2, Trump and the other countries as well will probably make some concessions.

Save face anywhere that they can in the short term. And then the ongoing tariff negotiations will continue to take place on a slower, you know, more developed time frame. That’s likely the best case scenario. Just two weeks away from that April 2nd deadline here. But you could see how that could be very bullish for the market if that is the case.

[00:12:46]:
You know, these end up making a much smaller impact than most people are thinking here. Again, buy the rumor, sell the new or sell the rumor, buy the news situation. Get the rumor being tariffs are terrible, the news being they’re not so bad. Market takes off. And you have to look at the rest of what the Trump administration has done so far because he does have some wins he can highlight on the messaging battle, whether it’s the success and deportation strategies and closing off the border. For new people coming in, you know, multi year lows.

Stopping fentanyl from coming across our border as well. Deregulations bringing down energy prices.

[00:13:27]:
Oil has certainly come down already, seeing egg prices come down as well. All of these things that he were campaign promises he’s executing on, but they don’t get the time of day because tariff and other topics and really a market correction are sucking all the air out of the room right now. But if you really kind of think through it, you know, I’m not a big 4D chess guys per se, but if you really think through what’s happening here, this you could see a win, win scenario for the market that yes, this correction has been painful in the short term. I think Trump recognizes that and does want to see the market doing well. So here are the two wins, you know, again with the tariff deal forcing other countries to the table here and then negotiate outside of the public eye.

Let’s get that wrapped up and focus again on the US Economy. So win number two here would be with tariffs already so far in the Fed meeting being ahead of the April 2 deadline is that this has slowed the economic forecasts. These are mostly soft data forecasts.

[00:14:34]:
We still think we’ll see growth in Q1. That’s our call here at the VRA. So I should have mentioned that one earlier out there as well. But he’s kind of forcing the Fed’s hand here, right? We are seeing disinflation, we are seeing slower economic growth and economic projections are lower as well. The Fed almost has no choice but at least comment on these factors.

So he’s forcing the Fed’s hand just like we’ve talked about here at length. He hasn’t gone to, to spar with Jay Powell in the the first two months at least of this administration and maybe that’s by design. So we’ll see here, you know, if that’s the case, we expect to see this rotation that we’ve seen. Right. We’ve talked about the rotation theme here a lot. DAX hit another all time high here today. Europe up again today. China also up again today.

And a lot of that has been a rotation out of the US if this is the case, we expect that to unwind this rotation to unwind very quickly and could lead to a sharp move higher here in the US in the short term as well. So tomorrow’s an important day. Stay tuned. We’ll be covering it here. Absolutely. So as I mentioned, the DAX did hit an altar 50 or all time high today. Excuse me, FXI, the China Large Cap ETF also hit a 52 week high today as well. So, so from a global perspective, new highs beget new highs really does remain true here.

[00:16:02]:
We are looking at this as a global bull market. We’ve said it for years now, even before Trump was reelected and that remains our base case here. So for our markets on the day, not pretty, but we did finish Slightly off the lows of the day. Nasdaq did lead the way lower so not what you want to see down 1.7% to 3317504 down 300 points on the day. Next up the S P 500 down just over 1% to 5614. The Dow Jones down 260 points to 41, 581. And finally here small caps other than the Dow really performing the best here today down just shy of 9/10 of 1% at 2:49. I will point out yes tech led lower down 1.7 for the NASDAQ but the semis were only down 1 1/2 there.

[00:16:57]:
Again that’s a group that we want to start seeing to lead from here. We’re also we’ve already seen outperformance versus the S&P 500 from the semis from the lows of you know what was that about five successions ago. Next up here looking at our internals on the day, you know for a day where all of our major indexes were lower and you know 300 points is not a small loss on the Nasdaq. You know not going to sugarcoat that these internals really weren’t too bad today at all. Looking at advanced decline here first, no two to one beats here even. You know we’re getting got a refresh here after the close. You know not even near 2 to 1 negative for either the NYSE or the NASDAQ. It was a little closer going into the close 52 week highs lows actually had one of our bright spots today coming in positive on the nyse.

[00:17:54]:
Bit of a lagging indicator and light numbers. So you know can’t make too much out of that right now. A little bit worse on the Nasdaq. Negative on the Nasdaq and then for volume was negative for both the NYSE and the nasdaq. Light volume I’ll say. And really again no two to one beats or anything here. So not a bad day for the losses that we had. You know we want to continue to see improvement.

This is incremental but we’ll take it. Next up looking at our sectors on the day here today, two out of our 11 sectors. So more than you might expect on a day like today. Did finish positive energy up 2/10 of 1% and health care up slightly as well are laggards on the day, Communication services, consumer discretionary and tech. It didn’t help that as I mentioned the Mag 7 didn’t participate yesterday. I believe all 7 of them finished lower today as well. So they make up a big portion of communication services, consumer discretionary and tech. Explains the laggards today.

[00:18:55]:
All right, finally here for today, an exciting one, I think. I actually, let me just double check here because I did have one more. Oh, man, I should have covered this earlier. Hope you’re still hanging in there with me here today because I do want to cover this one as well on the Fed topics. This is out from the bank of America. Bank of America here. It’s a little bit blurry of an image, so forgive me, but look at a few of these factors that we haven’t seen in, in years, right? Record rotation out of U. S stocks.

The biggest level since March of 2023. The biggest drop in US equity allocation on record. I mean, these are some crazy numbers. Also, one factor I didn’t mention earlier as well is the level of cash on the sidelines still in money market funds.

The largest rise in global market macro pessimism since March of 2020. If you take that as an outlier, that’s 31 years of data there. Wow. I mean, the. These are the kind. That’s the kind of fear you see in, in a market that is. Oh, sorry, there we go. That’s the kind of fear that you see, you know, when bottoms are forming, right? That’s a huge level of fear.

[00:20:13]:
Sorry, let me get my screen right here. There we go. Just a huge level of fear again. The, the type of fear you see at extremes, the type of fear you see at market bottoms, as you can see from some of these instances that I just showed in that chart as well. All right, so finally here for today, our VRA commodity watch. Let’s give you a refresh on my screens here. Gold with an all time high today of $3,047 an ounce. Last trade here, $3,041 an ounce.

And the outperformance from the gold miners continues here. One last look at those charts. But check out GDX also hitting an all time high here today. GDX as far as sectors go, is the second best performing sector, I believe, in the US Outside of, you know, other countries. I guess I should say that is the second leading one since the. The November election. November 5th election. You know, it might surprise you a little bit because gold and GDX have had incredible runs.

[00:21:19]:
So it is from the November 5th price, price, not from their lows that they made after November 5th. You take those numbers and it’s the best rally by far, but the one that has beaten it is actually still bitcoin with. Despite the fact that bitcoin. Let’s see what the last trade was here. If it’s refreshed in the, you know, since I’ve been recording this podcast, bitcoin. All right, about the same range, 82,000 here.

Would it surprise you that it’s actually been leading the way since November 5th? The November 5th close was 69. 378 for Bitcoin. So yes, this pullback hurts like every pullback hurts. But that’s, I mean, still 18% move in three months is not nothing there.

Tyler Herriage [00:22:05]:
It sounds like a lot less because bitcoin had had such an incredible run, getting above 100,000.

Tyler Herriage [00:22:12]:
So still, the performance from November 5 has still been good in some areas. Next up here for our commodity watch. I won’t cover bitcoin later here. We’ll just skip around a little bit. Let’s just wrap with our commodities here. We’ve got silver. Excuse me, that’s the real time quote, not the prices. Silver, last trade here, 34.64 an ounce.

Copper above $5 an ounce at $5 exactly right now. And oil remaining below $70 a barrel firmly at $66.75 a barrel. Did try to rally back today. Got to 6,850 a barrel, again closing at 66.

But folks, that is all that we have time for here today. Thanks for tuning in as always. Please be sure to subscribe to receive our daily VRA Investing podcast @ vraletter.com Click the podcast link at the top and we’d love to have you with us. Thanks again for tuning in. Until next time. We’ll see you back here tomorrow for the close.