Echoes of Power: Trade Moves Driving Us Closer to the Bottom

On this episode of Midweek Minute, Jeff Praissman sits down with Scott Bauer to unpack how trade tensions and policy ripples are rattling Wall Street. With markets teetering, they ask the big question: are we closer to the bottom than anyone’s willing to admit?

Summary – IBKR Podcasts Ep. 243

The following is a summary of a live audio recording and may contain errors in spelling or grammar. Although IBKR has edited for clarity no material changes have been made.

Jeff Praissman

Welcome to Midweek Markets. I’m Jeff Praissman. My guest today is Scott Bauer, CEO of Prosper Trading Academy. Scott, thanks for joining us. How are you doing?

Scott Bauer

I’m glad to be here, Jeff. These are some exciting times we’re going through right now. Thanks for having me.

Jeff Praissman

Yeah, no—our pleasure. It’s been one week since Liberation Day, and the markets have certainly reacted to the tariffs. But have we hit capitulation yet, or are we not there?

Scott Bauer

It’s really tough to say, because it certainly looked like at the end of last week we could have been teetering on that point—and even earlier this week, as we saw the VIX finally break out above 40, even above 50. And when you look historically—the VIX was launched back in the mid-’90s—when we see that big spike, that breakout, it typically signals capitulation.

Now, every time we go through something like this—whether it was the dot-com bubble, the Great Financial Crisis, 2018, COVID—we always say, “It’s not the same, it’s not the same, this time is different.” And yet, we see similar results.

This time might be a little different, only because we now live in a time where, literally at any second, we can get a tweet that turns the market on its head. We haven’t really experienced that before.

So I’d say, just from a trader’s perspective and based on my experience, we are closer to the bottom than not. But I’m not certain we’ve seen that absolute capitulation yet.

Jeff Praissman

That kind of leads me to ask—what are the best- and worst-case scenarios over the next few weeks for the U.S. markets? Obviously, capitulation might be the worst, but…

Scott Bauer

I’m just as concerned about what’s happening in the bond market as I am about equities. Over the last couple of days, we’ve seen massive selling—whether it’s sovereign selling, China, whomever—selling our treasuries. The 10-year yield has gone from basically 3.80 to—I think it hit 4.50 earlier today. It’s backed off that a bit now.

That could be a sign of capitulation right there: whether it’s sovereigns or others, they’re just selling to raise capital, whatever the reason.

But that concerns me, because when the market’s going down, rates are going higher, and inflation isn’t really coming down—it all adds up to a scenario that isn’t very optimistic.

And I don’t mean to sound like Pollyanna or anything here, but I think we just need to be cautious.

Jeff Praissman

And which markets stand to lose the most from these tariffs? The U.S.? Should we lump in Canada, Mexico, Europe, or Asia?

Scott Bauer

In the short term—probably Asia, and to some extent Europe. But down the road—3, 6, 9 months from now—we’re going to feel the effects here. And at that point, it really isn’t going to matter. It’s not a tit-for-tat thing.

It’s not about how painful it is for the rest of the world—it’s about how painful it is for the U.S. and what it’s doing to our economy.

In the short run, the impact may be felt elsewhere. In the longer run, it could be pretty painful here.

Jeff Praissman

Scott, thank you for your input—really appreciate it. This is Scott Bauer, CEO of Prosper Trading Academy, and I’m Jeff Praissman with Interactive Brokers in our Midweek Market Report. Thank you, Scott.

Scott Bauer

Thanks, Jeff.