The Week in Charts (4/14/25)
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The most important charts and themes in markets and investing…
1) Signs of Capitulation?
Last week was one of the wildest in markets that we’ve ever seen.
At the close on Tuesday, the S&P 500 was down 12.1% over the previous 4 trading days, the 12th biggest 4-day decline since 1950.
What has happened in the past following the biggest 4-day declines?
Stocks moved substantially higher over the next 1, 3, 5 years every time.
The S&P 500 was down 15.3% on the year on April 8, the 4th worst start to a year in history.
The S&P 500 also crossed into bear market territory, with a peak-to-trough decline of over 21%. This was the 4th bear market for the index in the last 7 years and the 5th correction of more than 20% since the March 2009 low.
Meanwhile, the Volatility Index ($VIX) had increased 143% over just 4 trading days, the 3rd largest 4-day spike ever.
What has happened in the past following the biggest $VIX spikes?
Stocks have tended to bounce back with above-average returns over the next 1-5 years.
High volatility/fear = opportunity for long-term investors.
The $VIX also closed above 50 last Tuesday which was in the top 1% of historical readings.
What has happened in the past following closes above 50?
S&P 500 gains over the next 1, 2, 3, 4, 5 years every time with above-average returns overall.
6% of stocks in the S&P 500 closed above their 50-day moving average on April 8, a reading more oversold than 98% of historical data points.
What happens when stocks are extremely oversold?
They tend to bounce, with above-average forward returns…
2) One of the Best Days Ever
And bounce they did, the very next day, with the S&P 500 gaining 9.5% after the new Tariff announcement (rate dropped to 10% for all countries except China with a 90-day pause on the higher planned rates).
That was the 3rd biggest one-day gain for the S&P 500 since 1950.
What has happened in the past following the biggest 1-day gains?
Stocks moved substantially higher over the next 1, 3, 5 years every time.
The $VIX fell 36% during the historic stock market rally, the biggest 1-day volatility crash in history.
3) Expect More Volatility
Is the high volatility period over?
Not likely.
The uncertainty over tariffs, while lower than a week ago, remains extremely high.
And it’s rare for volatility to move right back to normal after a huge spike.
Both the biggest gains and the biggest losses tend to occur in close proximity, indicating that volatility is not evenly distributed over time.
4) Rising Recession Fears and the Consumer Sentiment Crash
The fears over tariffs have translated into more people fearing a recession. Two-thirds of respondents in a poll I conducted last week said the US economy is headed for a recession in 2025.
The Atlanta Fed’s model continues to forecast negative real GDP growth in Q1 with their latest estimate at 2.4% annualized.
This is impacting the attitudes of consumers as well, with the University of Michigan Consumer Sentiment Index crashing to to 50.8. This is the 2nd lowest reading in the survey’s history which dates back to 1952.
The good news for stock market investors?
The best returns historically have come after the worst consumer sentiment readings, and vice versa.
5) Easing Inflation
Overall US CPI moved down to 2.39% in March, the lowest level since February 2021.
US Core CPI (ex-Food/Energy) moved down to 2.81%, the lowest level since March 2021.
This was the first Core CPI reading below 3% in 4 years.
Shelter CPI has now moved down from a peak of 8.2% in March 2023 (highest since 1982) to 4.0% today (lowest since November 2021). Given its long lag vs. real-time rental data, a continued move lower is expected which should lead to a continued decline in core inflation.
6) Fed Put to the Rescue?
At the lows last week, the market was starting to expect the Fed put to enter the equation, with a 58% probability of a rate cut in May.
There was also increasing chatter of the Fed intervening in the bond market, with the 10-year Treasury nearly hitting 4.60% at one point, moving up from below 4% the week earlier.
Why were Treasury yields rising?
A number of rumors were floating around, including Japan and/or China selling some of their Treasury holdings in order to create negotiating leverage with a Trump administration that had been pointing to a decline in the 10-year yield as a success.
If that was indeed the case, the strategy appears to have worked, with President Trump announcing a reversal in his hardline stance on Wednesday, with further concessions made on Friday evening (exempting phones, computers and chips).
But what about the Fed put?
With the big market rally to close the week in the green, the odds of Fed intervention plummeted, with the May rate cut probability moving below 20%.
The market is now once again pricing in the next Fed rate cut to occur in June, but if stocks/bonds take another leg lower, those odds will likely change once again.
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Disclaimer: All information provided is for educational purposes only and does not constitute investment, legal or tax advice, or an offer to buy or sell any security. Read our full disclosures here.
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