Weekly Edge: 7-13 April

Disclaimer

The following analysis is for educational and informational purposes only and should not be considered personalized financial advice. Always do your own research and consult a qualified professional before making investment decisions.

Apology

Firstly, I want to apologize for not getting this note on time this week. Normally, I like to write over the weekend but I got jammed with family commitments. Then yesterday, we had a death in the family and so although the note was already 70% written I couldn’t complete it.

Given constraints, the note is shorter in terms of commentary but contains many more charts. In times of panic, like the present, it pays to zoom out and look at the long term trends; that is, linear trends on 1 year and 5 year time horizons.

Hopefully my “bear market” and “don’t buy levels” advice helped keep you on the right side of the market. Personally, I’m disappointed to have monetized my short stocks position too early and there is a lesson; I should have waited until we saw signs of positive momentum before taking off the short position. Problem is my time zone is Melbourne, Australia and this approach would result in big reversals against my position by the time I get the signal. In any case, my risk was monetized at 5,100 which is where we are trading right now, and we do have positive momentum signal on 5m timeframe.

Sorry, I’m pushing out the note in a state of almost completion but I feel it is better late than never. Thanks for your understanding.

As usual, if you have any questions please reach out via the comments or within chat.

Must Watch Content

Scott Bessent was interviewed by Tucker Carlson last week and it is the “must watch” content of the week.

Before seeing the video, I saw Micahel Kao’s take on Trump’s grand plan:

It seems to me that the Trump 2.0 Tariff Strategy is ultimately aimed at cinching off all escape valves for China.

If we play it out to the limit, let’s say we Balkanize into regional blocs and China tries to power through with their Runaway Assembly Line Top-Down model without the US Consumer.

If the US succeeds in blocking off transshipment opportunities with these Global Tariffs, without the US Consumer as the end market, they will just wind up hollowing out the PBOC balance sheet as it bails out uneconomic businesses, churning out goods no one wants.

Result: Spectacular CNY implosion.

— Michael Kao (Urban Kaoboy)

My takeaways from the Bessent interview are:

• Trump tariffs aims to break the “runaway assembly line” business model of China.

• More interesting than discussions with countries will be the Trump administration’s discussion with companies. Deregulation and tax incentive are coming; companies are going to have a strong incentive to go big on capex within USA.

• I loved Bessent’s “body builder analogy” about the perceived strength of the US economy; it has inspired me to write a post (in progress) on GDP.

• Lastly, who could miss Bessent’s ambivalence about stock market returns. In his words, look at who owns stocks:

  • top 10% of wealthy Americans own 88% of equity market

  • next 40% of wealthy Americans owns 12% of equity market

  • bottom 50% of Americans don’t own equities, they owe debt.

Market Moving Narratives

Below are my top 5 market-moving narratives from the past week. I would add to these the “Black Monday” narrative that gained traction over the weekend, and catalyzed a giant 4% opening gap this morning in Asia.

These narratives collectively underscore a macro backdrop of policy shocks, tightening financial conditions, and fractured global trade—making markets highly sensitive to forward guidance and geopolitical developments.

Investors and traders alike wait with baited breath for a walk back from Trump, but this is just cope in my view. However, he will gloat the “wins” ie. favourable trade deals stuck with trading counterparties. In my opinion, that is the best news we can anticipate.

1. Trump’s Trade War Escalates – Stagflation Risks Surge

President Trump’s imposition of a universal 10% tariff on all imports (effective April 5) and reciprocal tariffs of up to 25% on 60 countries is the dominant market narrative. This “Trump Tariff Turmoil 2.0” has:

• Triggered a broad equity sell-off (S&P 500’s worst day since the pandemic, Nasdaq entering bear market).

• Fueled stagflation fears, with PCE inflation expected to rise to 3–4% and growth stalling.

• Increased the probability of a U.S. recession to 50%, with the Atlanta Fed GDPNow projecting Q1 contraction of 1.4%.

• Sparked retaliatory tariffs from China (34% on U.S. goods), and increased risk of global trade fragmentation.

2. Global Manufacturing Downturn Intensifies

Manufacturing PMIs showed ongoing contraction in major economies:

• U.S. ISM Manufacturing PMI fell to 49, below expectations.

• Germany and UK remain in contraction despite minor rebounds; UK’s PMI is a particularly weak 44.9.

• Eurozone’s unemployment fell to 6.1%, but services confidence is deteriorating.

• Cost pressures are rising, signaling future goods inflation, especially in the U.S. and Canada.

3. Financial Conditions Tighten – Equity and Credit Markets React

Markets are re-pricing risks across the board:

• U.S. equities posted steep losses, particularly in tech and small caps. The S&P 500's forward P/E fell below its 10-year average.

• High-yield spreads widened sharply, matching the 2020 COVID stress levels.

• Long/short hedge funds reduced exposure, and SPY ETF saw large outflows.

• Rate cuts are now fully priced in, with 3 Fed cuts expected in 2025 amid growth concerns.

4. Resilient Labor Market vs. Cracks Emerging

Despite economic turmoil, March’s Non-Farm Payrolls beat expectations (228k vs 135k) and unemployment rose only slightly to 4.2%. However:

• Layoff announcements have surged, especially in tech, retail, and government.

• Job openings (JOLTS) fell again, and continuing claims are rising.

• The Beveridge Curve indicates labor market cooling, but not breaking—yet.

5. Commodities Rally and Policy Divergence

• Gold surged to record highs ($3,192) amid safe-haven demand, with projections reaching $4,000 if tariffs persist.

• Copper and silver markets are volatile: CTA demand is high, but short interest in silver ETFs hit records.

• Oil prices collapsed (~7% drop in Brent) as OPEC unexpectedly boosted supply.

• Diverging central bank paths: ECB and BoE are expected to cut rates, while Japan and Canada face policy constraints.

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Momentum Analysis

Momentum across global macro assets presents a clear picture of a high-volatility, stagflationary risk-off regime with elements of flight to quality and policy-driven dislocation across global macro assets.