Trade Tensions Ease: Inside the 10% Market Rally and What's Next
Trade Tensions Ease: Inside the 10% Market Rally and What's Next
Analysis of the 10% market surge following tariff pause announcements. Learn why rising bond yields at 5.55% signal caution, how to adjust valuations, and where to find defensive opportunities.
Trade War Paused: Market Surges 10% After Presidential Tweet (But Is It Really Over?)
The Tweet That Shook the Markets
Is the trade war officially done? Has the bottom come in now? We're expecting a huge mega rebound because we got a huge mega rebound the last two hours of trading. Why? Because of a specific tweet from the President to pause tariffs for 90 days.
The markets experienced a stunning rebound with the NASDAQ surging nearly 10% in just two hours of trading. After weeks of heightened tensions and market volatility, investors breathed a collective sigh of relief. But let's be honest – is this really over? Stick with me as we dive into the nitty-gritty reality.
Understanding the Real Impact
Before we discuss whether it's over, let's look at the real impact. I mean the 10% NASDAQ surge, 8.7% S&P boost – not just for the day, but for the last two hours of trading because of a single tweet that came on Truth Social!
The market reaction has been nothing short of explosive:
NASDAQ jumped approximately 10%
S&P 500 rebounded by 8.7%
Tech stocks went absolutely berserk – Nvidia up 18%, AMD up 20%, and Robinhood soaring 23%
It's crazy! The last two weeks seeing the market go down has been painful, but now watching this roaring rally... is this a fairy tale that's been made up? This rapid recovery came after a painful decline that had many investors questioning their strategies. The market's swift response demonstrates just how sensitive equities have become to trade policy announcements – especially ones that come directly from the President rather than through traditional policy channels.
The Trade War's Ping-Pong Effect
Now we realize it's not us against the world, it's us against China. That's the current situation. With tariffs being implemented and counter-measures following, it was like a ping pong match for the last 36 hours.
Before we celebrate too enthusiastically, let's examine what actually happened:
Significant tariffs were imposed across multiple countries
China responded with tariffs of their own
There were concerns about Treasury bonds and yields
Warnings emerged about international relations
The announcement came for a 90-day pause on most new tariffs
Let's talk about the countries involved in this negotiation dance. There were tariffs applied to Vietnam, Thailand, and Taiwan. And it goes on. Everybody came and negotiated. Everyone who didn't retaliate received this 10% relief for the next 90 days. All that previous positioning is not eligible anymore. It was like a test – "Do not retaliate, you will be rewarded." That's what's been communicated.
Beneath this apparent de-escalation, substantial tariffs remain in place. Even with the pause, companies face a 10% tariff compared to last year – a reality that will continue to impact supply chains, costs, and ultimately consumer prices.
There's a lot of debate going on with different perspectives on these developments. Let the economists explain it and we can digest it later.
A Moment for Reflection
For now, this is indeed a relief. A relief for many of us long-term investors. So take a breather, take a break for the next few days. Take a step back and really look at your portfolio. Reflect.
Don't go and tell yourself, "I should have bought more" or "I should have slapped my mortgage on it." Calm down! Five days ago, lots of people were telling me they really regretted not taking profits at the top, and now they're regretting not buying the bottom. You need to calm down and reflect on where you went wrong. That's what we really need to discuss.
One thing I want to emphasize: I like Professor Profmo (I call him Profmo – I even encourage my kids to get to university and get taught by him if they can). But what I want to reiterate is that economists can only explain to you what's happened. They're like history teachers with great book deals, but they cannot forecast what's coming.
So when you go on Twitter or read about what any economist says – even ones you favor – just remember they're explaining what's already happened. They're lagging indicators. They cannot explain the future. As an investor, you have to be careful about what you read because whatever you've seen is already the past.
Buy Trigger Updates & Investment Strategy
As a matter of fact, I had to tweak my Buy Trigger. I had to adjust my valuation models. I've increased the risk parameters because valuations will change. Remember – tariff or no tariff, there's still a tariff compared to last year. Things will still get expensive. Inflation is still a consideration. Recession or no recession, we still need to talk about it.
The value of stocks going forward and the company forecasts will be affected by these tariffs, which will reduce earnings per share. That impacts everything. Let me give you some examples:
Nvidia: Last week before I upgraded my conservativeness, it was at 149. It dropped from 160 to 149. I've further tightened the handle, and now it's 139.
Amazon: Was at 310, I've tightened it to 280.
Before
After
All the value triggers, which are automatic, I've tightened the parameters to make them more conservative. It doesn't really affect the buy trigger – the value trigger is in place to defend it. But we shouldn't take this lightly because with bond yields rising, the value of companies going forward is reduced.
The 10% tariff is still in place. Things will get more expensive if international trade relations remain strained. Where will companies produce consumer electronics? Where will they make cars? Materials will get expensive. So it's not over – one announcement doesn't resolve everything. There's still a lot of negotiation happening for the next 90 days.
Will the 90 days resolve issues with every single country involved? Remember past international negotiations – they often take much longer than anticipated. These processes could extend considerably.
It's NOT Over - Warning Signs Remain
Here's where we were: We were on a journey to the great big land of opportunity and something happened – the boat sank, and all we had to do was survive. The market correction happened. Have we survived or not? It is still not over, folks. I repeat: it is still not over.
Today feels like the Titanic scene – that light coming through, that hope we're all feeling. But remember, we're still out in the cold. We're still hopeful. Is it a real boat? It looks genuine. I can feel it. I'm still alive, blowing my whistle.
Let me be clear about why I'm concerned:
1. The VIX is Still Elevated
Looking at the VIX, it's come down. It looks like the eruption is over and we're making our way down. But hey, we are still at 33! It's still a while before we get back down to 20. And we need to consider – if we do get down to 20, will it bounce up again? This 90-day pause can get "unpaused," and we've seen how the media can affect markets very easily. One tweet and boom – markets go up or down. This is a hyper-volatility moment, and the VIX is still our best friend.
2. Bond Yields Are Rising Dangerously
The Moody's 20-year corporate bond yield is rising up to 5.55%. When this bond yield goes up higher and higher, it devalues stock valuations. That's why you're seeing loads of price target downgrades across different companies. It's due to the bond yield and future valuations – it's how much your company is worth. The yield could come down, but we're still above the threshold of 5.5%.
Diversification is Still Key
I am not asking people to take this as a celebration that we've hit the bottom. It's not the bottom yet. The sideways market is still happening. We have to be careful and vigilant.
If you've followed me, de-risking is still key. You need to diversify beyond just semiconductors and tech. I've recently moved into more defense-oriented positions. I'm also looking at cybersecurity. Why? Because if tariffs kick in, cybersecurity will still be there. And defense? Because some countries are adjusting their procurement strategies for defense materials. So who's going to supply various markets around the world? Companies may need to level up and improve productivity to serve global demand. That's an opportunity – that's why I'm moving in that direction.
For my club members, you get the whole database of Buy Triggers as part of what you get. For visitors who aren't club members, you can still go to my website – alexkoh.me – where I've increased access to 20 of the top stocks in the database for free. Feel free to check out buytigger.io or click the link below to get it at no cost. If you join the Free Buy Trigger club member starter plan, it's there for you to use if this isn't a great time to afford a membership. I'm trying my best to give as much free content as possible, along with my time.
Personal Challenges as a Content Creator
What really worried me over the last four weeks wasn't my portfolio. I was in complete control of all the portfolios I managed. I understood the risk. There was no point where I was thinking, "Oh, should I have sold at the high?" I was managing really well.
My real challenge was as a content creator. For people who follow me and my club members – that was my difficult time because I had to manage the stress level in the room. I had to think twice about what I would say, and I was stressed about potentially steering someone to do something they shouldn't. That was the most difficult part of being a content creator – making sure I supplied facts while being less biased. But sometimes you need to be biased to steer toward reality.
I want to thank everybody who's walked this journey with me. It's not easy on the content creation front when you're trying to see the future, but I appreciate everyone who has joined me on this journey.
Stay Vigilant: We're Not Out of the Woods Yet
Going forward, what's next? We just have to stay vigilant. I need everybody to remember – we just got on the boat, we saw distant light. We might be safe, might not be safe. Could you survive the cold? We're still out there.
Remember this picture of hope but also remember the suffering we went through. And remember your portfolio diversification. Why did your portfolio go down so badly? Was it the high-risk stocks you held, or was it the lack of diversification? Did you hold too many semiconductor stocks or too many tech stocks? These are things you need to think about going forward.
It is not over. But you and I – we are all portfolio managers of our family's accounts, and we really need to defend them at all costs. You can say you sold at the top, but we're on this journey together. You cannot really sell everything out because if you sold everything last week, you would have missed this bounce. You'd have made an even bigger loss because you'd have bought back in at a 10% more expensive NASDAQ and completely locked in your losses.
Is this a glimmer of hope? It's more positive than last week, but it's still not clear where we go. I really hope you enjoy this content that I create day in and day out for everybody.
Conclusion: Defend Your Family's Financial Security
For investors, this pause is a moment to:
Take a breather and reflect on your portfolio
Stop beating yourself up about not timing the top or bottom perfectly
Evaluate your risk exposure and diversification
Consider defensive positions in sectors like cybersecurity and defense
Be prepared for continued volatility – this isn't over!
Remember: We are all portfolio managers of our family's financial security. Our job is to defend those assets through all market conditions, not just the easy ones. We've seen the light, but we're still in cold waters.
Full Video here below
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Disclaimer:
This blog post is for informational purposes only and does not constitute financial advice. The views and opinions expressed in this post are solely my own and are based on my personal analysis and experience. All information is provided on an as-is basis, and while I strive to ensure accuracy, I make no guarantees regarding the completeness, reliability, or accuracy of the information provided.
Investing in stocks and financial instruments involves risk, including the potential loss of principal. Always conduct your own research and consult with a qualified financial advisor before making any investment decisions. This blog is intended as a personal journal to document my thoughts and strategies, and should not be taken as a recommendation to buy or sell any securities.
By reading this blog, you acknowledge that I am not responsible for any investment decisions you make based on the information provided here. Please exercise due diligence and consider your own financial situation and goals before making any investments.
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