At this point, I’m just about ready to retire because I am seeing things I have no memory of or have never seen before.
The USDCHF fell by more than 3.8%, a monumental move. It was either a newfound flight to safety or a flight out of US assets altogether. But whatever it was, money quickly left the US today and returned to Switzerland.
But that wasn’t all because the EURUSD strengthened by more than 2%, while the USDJPY also strengthened by more than 2%. It would seem that every currency is now seen as either safer than US dollars or, more importantly, is seeing a massive flight of money out of US assets that is heading back home.
This is probably why Treasury yield continued to surge, with the 30-year closing around 4.87, its highest close since mid-January. Given the market dynamics, the 30-year could not only be heading back to 5% but to a new high of over 5.1%.
More interestingly, the recent rate rise has much to do with the increase in the term premium again. The 10-year term premium is back to its cycle high. This is investors’ way of saying they demand higher rates in return for the risk.
I will say that I was surprised to see that the S&P 500 was down only 3.5%, given some of the flows in FX and Bonds, I would have expected it to be down more. It was down more at one point, which amounted to about 6% around lunchtime, before returning in the day’s final half. When looking at the S&P 500 futures, it appears to have a big bearish rising megaphone pattern, and at least based on that pattern, it would suggest that all the post-tariff relief celebrations are probably gone by tomorrow.
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Originally Posted on April 10, 2025 – Stocks Are Down, And May Be Heading Even Lower.
Footnotes
1. USDCHF, EURUSD, USDJPY
•Definition: These are currency pairs in the foreign exchange (FX) market.
•USDCHF: U.S. Dollar vs. Swiss Franc
•EURUSD: Euro vs. U.S. Dollar
•USDJPY: U.S. Dollar vs. Japanese Yen
•Context: Movements in these pairs reflect shifts in currency strength and capital flows between countries.
2. Flight to Safety / Flight Out of US Assets
• Definition:
•Flight to safety: Investors moving money into perceived safer assets or currencies during times of uncertainty.
•Flight out of US assets: Capital leaving U.S. markets, often due to reduced confidence or better opportunities abroad.
•Context: These terms describe investor behaviour in response to geopolitical or economic stress.
3. Treasury Yields (30-Year)
•Definition: The return on U.S. government bonds; the 30-year yield reflects expectations of long-term interest rates and inflation.
•Context: Rising yields indicate falling bond prices and/or increased investor demand for return.
4. Term Premium
•Definition: The extra yield investors require to hold a long-term bond instead of rolling over short-term bonds.
•Context: A rising term premium suggests increased uncertainty or risk aversion about the future.
5. Cycle High (Term Premium)
•Definition: The highest point the term premium has reached within a given economic or interest rate cycle.
•Context: Indicates a peak in investor risk demands over a particular period.
6. S&P 500 Futures
•Definition: Financial contracts that speculate on the future value of the S&P 500 index.
•Context: Used by traders to hedge or speculate on U.S. equity market movements.
7. Bearish Rising Megaphone Pattern
•Definition: A chart pattern in technical analysis with widening price swings and an upward trend, typically seen as a bearish signal suggesting a potential reversal or breakdown.
•Context: Indicates volatility and possible market decline.
This report contains independent commentary to be used for informational and educational purposes only. Michael Kramer is a member and investment adviser representative with Mott Capital Management. Mr. Kramer is not affiliated with this company and does not serve on the board of any related company that issued this stock. All opinions and analyses presented by Michael Kramer in this analysis or market report are solely Michael Kramer’s views. Readers should not treat any opinion, viewpoint, or prediction expressed by Michael Kramer as a specific solicitation or recommendation to buy or sell a particular security or follow a particular strategy. Michael Kramer’s analyses are based upon information and independent research that he considers reliable, but neither Michael Kramer nor Mott Capital Management guarantees its completeness or accuracy, and it should not be relied upon as such. Michael Kramer is not under any obligation to update or correct any information presented in his analyses. Mr. Kramer’s statements, guidance, and opinions are subject to change without notice. Past performance is not indicative of future results. Neither Michael Kramer nor Mott Capital Management guarantees any specific outcome or profit. You should be aware of the real risk of loss in following any strategy or investment commentary presented in this analysis. Strategies or investments discussed may fluctuate in price or value. Investments or strategies mentioned in this analysis may not be suitable for you. This material does not consider your particular investment objectives, financial situation, or needs and is not intended as a recommendation appropriate for you. You must make an independent decision regarding investments or strategies in this analysis. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Before acting on information in this analysis, you should consider whether it is suitable for your circumstances and strongly consider seeking advice from your own financial or investment adviser to determine the suitability of any investment.
This report contains independent commentary to be used for informational and educational purposes only. Michael Kramer is a member and investment adviser representative with Mott Capital Management. Mr. Kramer is not affiliated with this company and does not serve on the board of any related company that issued this stock. All opinions and analyses presented by Michael Kramer in this analysis or market report are solely Michael Kramer’s views. Readers should not treat any opinion, viewpoint, or prediction expressed by Michael Kramer as a specific solicitation or recommendation to buy or sell a particular security or follow a particular strategy. Michael Kramer’s analyses are based upon information and independent research that he considers reliable, but neither Michael Kramer nor Mott Capital Management guarantees its completeness or accuracy, and it should not be relied upon as such. Michael Kramer is not under any obligation to update or correct any information presented in his analyses. Mr. Kramer’s statements, guidance, and opinions are subject to change without notice. Past performance is not indicative of future results. Neither Michael Kramer nor Mott Capital Management guarantees any specific outcome or profit. You should be aware of the real risk of loss in following any strategy or investment commentary presented in this analysis. Strategies or investments discussed may fluctuate in price or value. Investments or strategies mentioned in this analysis may not be suitable for you. This material does not consider your particular investment objectives, financial situation, or needs and is not intended as a recommendation appropriate for you. You must make an independent decision regarding investments or strategies in this analysis. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Before acting on information in this analysis, you should consider whether it is suitable for your circumstances and strongly consider seeking advice from your own financial or investment adviser to determine the suitability of any investment.
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Stocks appeared ready to take a major drop last week. Even after the wild Wednesday due supposedly to the Tariff Delay (and perhaps the biggest short squeeze in history) the selling resumed Thursday. At the low on Thursday, when the SPY was $510, an April 17 $400 put option (expiring in just 7 days on Thursday since the market is closed for Good Friday) was $2.70(!!!) This volatility reflects nervousness not seen in many years. Clearly, many traders are expecting something to go very wrong. I have not budged from my prediction that the S&P will see 4500 again, which I have had since months before the election. I feel it could go much lower, but 4500 is still my “Lock Target.” There was actually a significant technical signal in January, when the S&P dropped below its December low, which is known to be a reliable indicator of a down year. The S&P and the Nasdaq 100 are both forming “Death Crosses” now. I still hear predictions of 6500, 6800, even 7000 for the S&P this year by the TV pundits. What are they looking at???!!! Stocks peaked just as the market cap of the S&P 500 got above $50 Trillion. That is just the S&P 500, not all stocks. It’s the biggest bubble ever. The most bullish case scenario I could make is that the major averages are at about the same level in five years, after averaging almost 14%/year the past fifteen years (in large part due to the enormously outsized gains of 2023 and 2024) much higher than the historical inflation adjusted 8% annual average return.