April 4, 2025 – Tariffs triggered a market meltdown this week. Dan Wantrobski at Janney Montgomery Scott joins Financial Sense Newshour to provide his macro and technical outlook on the markets with institutional shake-ups, frothy US valuations, and fleeing foreign cash. Wantrobski predicts a wild S&P 500 drop to 4,650-5,000, hints at a looming recession, and reveals the Fed’s next moves. Gold’s set for a twist, Bitcoin’s on a rollercoaster, and a 20-25% correction might not even spell a bear market. Liquidity’s the name of the game—tune in to hear the full, gripping breakdown of where things may be headed!
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Key points discussed in today's show:
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Trump’s tariff announcements sparked a market downturn, prompting institutional portfolio rebalancing.
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U.S. markets were overbought entering 2025, driven by institutions, retail investors, and foreign capital.
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Dan Wantrobski predicts the S&P 500 could fall to 4,650-5,000, a 20-25% correction.
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Equity and bond markets, plus the yield curve, signal a potential recession within 9-12 months from September 2024.
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The Fed may ease quantitative tightening and lower rates to counter economic disruption.
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Gold is overbought short-term but bullish long-term; Bitcoin could drop to 65-75K yet remains promising.
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A 20% market drop doesn’t necessarily mean a bear market—liquidity and time matter.
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Foreign capital is shifting to Europe as U.S. fiscal stimulus shrinks, impacting liquidity.
Transcript
Jim Puplava:
The market's not reacting well to the president's tariffs. Where does this market go from here? Is this just a correction or has a new bear market begun? Let's find out. Joining us on the program is Dan Wantrobski. He's associate director of research at Janney Montgomery Scott, I guess. Dan, my first question, why do stocks go down?
Dan Wantrobski:
It's a heck of a day to ponder that question, Jim. It's always good to be here. So, I think with today, obviously the culprit, easily visible to any of us, is the Trump tariff announcements that occurred in the Rose Garden yesterday. And this is triggering a lot of rebalancing in institutional portfolios, institutions. As I mentioned, you know, the selling that's taken place prior to today, really our correction kind of began some point in mid-February this year. But institutions, for actually several weeks, have been doing a decent job of paring down their exposure to U.S. equities. Look, Jim, there's a number of things we could talk about with this market tape here. I don't want to take up too much time or go down too many rabbit holes, but one of the things coming into this year, coming into 2025, was simply U.S. markets, in particular, were very frothy, very overbought as a result of three things: institutions piling in on the long side; number two, retail investors in the U.S. piling in on the long side again with more specific concentrations in U.S. mega-cap, large-cap, and the darling Magnificent Seven; but the third thing you want to keep in mind, foreign capital has been rotating to our shores not just last year, but probably for the last four years. We've seen big inflow, big rotation of foreign funds into U.S. equity and bond markets. And all these three sort of forces collided to push multiples not to extremes, but certainly price action and things like the S&P 500, the NASDAQ 100, to what I consider some short-term extremes. I don't think we're seeing a culmination of the stock market bubble like we had in 1999, but in terms of macro flow, this was a very, very crowded trade coming into 2025. And as I mentioned, U.S. institutions—these are pension funds, hedge funds—for the last several weeks, really in the first quarter, had been doing a decent job of paring down their exposure on the long side to almost the point where, the last week or two, they got to net neutral, even maybe a net short position here. So, they were positioned, I think, ahead of today. Not all of them—you can't speak to all of them—but what we're concerned with from this point on is retail and foreign investment flow. Because, and this is in my opinion, retail, which has its highest concentration, its highest percentage, you know, a foothold in the stock markets ever in its history, right? On a relative basis, percentage-wise, Main Street has the highest exposure to equities here ever in the last several weeks. And really, all throughout the first of 2025, they have not been selling. Now, I don't—we can't count cards like in a casino, what everybody's doing—but I do talk to a lot of wealth management, you know, representatives. I work for a wealth management firm, you know, that deals on the retail side. And I can tell you, you know, retail, though they are concerned about what's going on in the macro landscape—they're certainly concerned in the U.S. in terms of inflation and potential recession ahead—they have not been paring down their exposure aggressively. In fact, I would venture to say they really haven't begun selling at all. And so, if you trigger in that wave, that could push this thing lower. And then again, the third prong of this, the third leg of this stool, is foreign investment flow and foreign capital. And we have started to see some of that exit the U.S., move over back overseas, you know, a lot of it to the Euro region. And that's a little bit different animal because, in my opinion—and we've talked about this in the past—you know, investors and stocks, it chases liquidity. And the setup you have here in the U.S., and this is separate from tariffs, but the setup we have under this new administration is they're going to streamline—and we've already seen this—and really pull back on fiscal stimulus, public sector spending, federal government spending. And people may laugh—that's an understatement given what's kind of transpired with DOGE and all these different things. Well, we want to keep that in mind because fiscal stimulus for the last four years was a great, great creator of liquidity getting pumped into the economy and the markets—fiscal stimulus. And if you take that out, you have liquidity concerns, or you certainly have liquidity concerns from an investment community. As we've said in the past, if America runs on Dunkin’, the markets run on liquidity. It's fuel in the tank. And this is separate from interest rate policy, which really are more like the gas pedal and the brake pedal of money velocity of that fuel in the tank of those liquidity conditions. So, foreign investment flow, which has been coming to our shores over the last several years, could see a reversal as we cut back on fiscal stimulus, we become fiscally conservative. And this is—that's separate from monetary policy and the Fed—this is simply federal government spending. So, we're pulling back, right? But overseas, they're actually ramping up. You know, as Europe seems to, at least the appearance of it, prepares to move forward and escalate war, their fiscal stimulus spigots are going to be open. And so, we see capital rotating, mostly to Europe. So, you'll see, versus the S&P or our Russell 2000, our ETFs here, which have all been in a corrective mode since mid-February, things like the VEU and the VEA—these are ETFs that track European markets, equity markets—those have all been rising and performing much better on a relative basis. So, there's a lot of crosscurrents in this market right now, tariffs being a main one right now today that people are readjusting for. But again, tariffs are not the only thing with this tremendous amount of macro uncertainty. Given that the markets came into this year at such overbought and frothy levels, there is bandwidth for repricing. This is basically an overbought market that is adjusting to a brave new world in macro conditions and liquidity conditions. So, net-net, I believe that even though the markets could be considered oversold today and we are likely to see some oversold rallies, some bounces in U.S. equities, I do think we are headed for a leg lower, you know, beyond today, however this flushes out. It's—the trading action today is already getting very choppy, Jim. And we don't have 90% downside days. We don't have panic selling out there. There's some stocks that are now in positive territory. Breadth on the S&P is only about 4-to-1 decliners over advancers. So, this isn't all-out selling and capitulation. But because of these reasons, I think ultimately, because of the change in the shift in the macro conditions, I think it is likely that a better buying opportunity for the S&P 500 is going to be closer towards the 4,650-5,000 range. So, I do think, given all that's going on, given how the technical setups are on the charts in both equities and some of the macro areas that are complementary to that, we are going to still take a leg lower here even after today. And our target range is 4,650 to 5,000 on the S&P 500. Sorry to be the bearer of bad news on, you know, it's already a bad start to the day.
Jim Puplava:
You know, the other thing we have to take a look at, as you brought up, all the stimulus that came with the Biden administration the last four years, now you have DOGE pulling back on that. Workers are being let go, they're cutting a lot of spending, and then you also have the tariffs. Dan, what happens if we actually go into a recession where it does impact earnings? The deficit could get bigger. How does that play out, and what does the Fed do?
Dan Wantrobski:
Yeah, well, so remember the markets act as a leading indicator. They're discounting mechanisms. So, most of the time, once a recession begins, the markets have already made the huge brunt of their corrective action. And that's not saying that the markets couldn't correct further. But I think what the markets are telegraphing to us now is that we are, in fact, headed for a recession. I think you could argue some sectors have already been in a soft recession based on our work. I don't think this is going to be a massive hard landing or a Black Swan event. It could be more of the typical recession that we've seen, maybe in the '90s, you know, some of the more recent ones. But, you know, this isn't going to be like a COVID Black Swan event or a Great Financial Crisis Black Swan event—at least let me just say that, you know, the charts at this point, our technical work, does not point to that at this point. And so, yeah, the markets can correct further here. I think even with recession in mind, somewhere in that 4,000 to 5,000 range, the S&P, there's a good chance that it would bottom. Complimentary to the equity markets, bond markets here—they're telegraphing, in my opinion, either recession or some type of geopolitical disruption ahead. Either case triggers de-risking and a rotation into safe-haven Treasuries, and that is why, you know, 10-year note yields are declining notably as they are. For the technical folks out there, check out the chart on the 10-year note yield. There's a big pattern there that is clear as day, and that's what we'd call a head-and-shoulders top formation, and you are breaking down those levels. So, that thing is coming into view, it's developing, and it suggests to me the 10-year note’s likely going to 3.80% and could possibly go to 3.60% against that 10-year watch. The 2-10 spread—the 2-10 spread has been a great indicator since the 1970s for signaling recessions ahead. When you move from inversion in an inverted yield curve, you bear steepen into a normalized curve—that sets off the countdown clock to recession. It doesn't work well as a timing indicator, unfortunately, even though it has a hit ratio of 95%. In other words, the timing could be—once the yield curve moves from inversion back to a normal curve—the timing from that point on could be anywhere from like a week out to two years, right? So, that's where it gets a little wonky. But the truth is that we just got out of one of our longest periods of yield curve inversion since the early 1980s. And that recession countdown clock was triggered last September of 2024. The average duration, once that countdown clock is triggered, based on my work, is anywhere from about 9 months out to 12 months out when the recession should hit. So, now we're getting into that window. So, I think both the equity markets and the bond markets, as well as the yield curve, are signaling potential recession ahead. Again, I don't know what it looks like or what it will look like, but at this time, it does not appear it would be a Black Swan event-type recession. And to your point on monetary policy, I think they've already clued in what they're going to do the last time Powell spoke. So, there was the March rate decision day—everybody watches this, and the market is myopically focused on interest rates all the time. I will tell you guys, I care much less about interest rates and interest rate policy than I do about real underlying liquidity conditions. I continue to believe that's the real key to everything. Again, rate policy is sort of the brakes and the gas pedal and causes sort of intermittent gyrations. But the point being is that, so, in March, the Fed held rates steady. But what Powell did signal, if you noted, they have been busy over the last few years in quantitative tightening. They're reducing their balance sheet. The Fed is reducing its balance sheet after the explosion in liquidity it created as a result of the COVID pandemic. So, they blew out their balance sheet, they printed up all this liquidity, all this money, flushed it into the system. We had the CPI burst to 10% and had all the inflation rigmarole, in which the Fed then responded by aggressively jacking rates, right? And so, we're still on this sort of watch and this outlook for elevated inflation, which I think is still very real. Yet, at the same time that the Fed has been undergoing its process or its operation of quantitative tightening, which is effectively pulling liquidity out of the system, right? Tightening financial conditions. What they signaled last March—what Powell said—they are reducing their quantitative tightening program. In other words, it's almost the second derivative of quantitative easing now. They're not going to be reducing their balance sheet size so much anymore. And, in my opinion, that is because they are concerned about what we are seeing in the markets and the economy, and they want to make sure that we have ample liquidity—liquidity to make it through any major economic disruption or market disruption. So, I think the next steps from the Fed, you know, if we do approach an official recession, is that you're going to see they're probably going to stop that QT program, and they're going to lower rates, right? And so, that's their easy recipe. During times like this, if things get out of hand and, for some reason, we do have maybe a Black Swan event or a false flag event that creates a major, major market-destabilizing action or, God forbid, a market crash, I would not be surprised by the Fed to intervene, reverse, and maybe provide some QE—quantitative easing—as well. So, that's direct liquidity creation and injection. Those guys are ready, and they're on standby now watching this market, in my opinion.
Jim Puplava:
Dan, let's talk about something that's done extremely well over the last couple of years, and let's talk about the price of gold and silver last year and this year. Any comments there?
Dan Wantrobski:
Yes. So, gold—we remain long-term bulls on gold. Gold works much better during geopolitical disruption, currency crises, as it does during inflationary times, believe it or not. And we believe the cycle that we're moving towards remains reflationary expansion as far as the U.S. is concerned. And so, gold should continue to act well. However, gold, with recently hitting all-time highs—and I think this morning it once again hit new secular highs—gold, on the charts, my opinion, is signaling a short-term potential reversal, and it's a bearish reversal. I think we have to be careful on gold prices over the short run. If you're a long-term investor in gold, you can stay the course. It's not necessarily a call to action. What I would watch is, you know, the 3,000 zone. If it breaks back below 3,000, that's a signal that there is a reversal. We're going to see more profit-taking. You could see levels closer to 2,800, possibly 2,400 to 2,600, which would be a decent-sized correction. So, I'm not for—so, for new money, we're not looking to jump in on gold prices right here. We would wait for a pullback. I think a reversal is coming. Gold—there’s two technical factors that I think people should be aware of with gold. First is the commodity is overbought across multiple time frames. It doesn't, you know—if you get overbought on a short-term chart, on a daily chart, you have a pullback, that's fine. But what we see is when we cross-reference all these charts over different time periods—so, you do minute charts, daily charts, weekly charts, monthly charts, quarterly charts, right? You line all this stuff up because markets are fractal, right? When you line them all up and you get a signal in the same direction, that's when it is a very strong signal. So, right now, gold is overbought, is very extended across multiple, multiple time frames, Jim. That, to me, suggests that it is vulnerable. The second thing with gold that I would just be careful of is what silver has been doing. Now, I am a silver bull. I think the long-term charts look bullish there. But if you note, gold has made new highs, silver has not responded in kind with those new highs. We treat this the same as you would, like, Dow Theory, right, with industrials versus transports, or how you use the NYSE cumulative advance-decline line, which gives you market breadth, right? So, the S&P is going to new highs, but the broader markets aren't—it's a divergence. So, there's a big divergence between gold and silver prices. And if you go back to the 1970s, they're usually complementary. In other words, if gold's making new highs, silver’s kind of right there. Maybe it's not acting as well on a relative basis in percentage terms, but it's making those same sort of technical milestones. So, the big problem with gold, I think, over the short run, is it's overbought across multiple time frames. And then, number two, there's a big divergence—silver has not made those new highs alongside gold. I think that's a negative divergence. So, I think we do get a pullback in gold over the short run. I'm, you know, I'm going to look to buy at 2,800. I have a feeling it may break below 2,800 and go to those secondary levels I mentioned. So, I'd probably be a better buyer on gold in the 2,400-2,600 range. I'm not looking to put new money into gold today.
Jim Puplava:
All right, well, listen, Dan, so possibility this goes much, much lower. In fact, if we got down to your figure, 4,600 on the S&P, that's almost a 25% loss for the S&P from its high.
Dan Wantrobski:
Yep. Yeah, yeah, it is. Right, so 4,650 to 5,000 is the general range that we're watching, is around 22% correction. Yeah, if it breaks out and you go to the low 4,000s, it’s about 25% correction. Now, keep in mind, the Russell 2000 is down 22% as of today. The Small Cap 600 is down 22%. As they see small caps—that de-risking gets led in small caps. The Mid Cap 400 is now down 18%, Jim. The NASDAQ 100, though, here—this is your mega-cap tech darlings, the Mag 7 home—that's down 17%, you know, as of today in this correction. So, right now, the S&P is down just under 12% in this correction. So, can it push towards an S&P down 20%? I think so. Your holdout is the Dow and the NYSE Composite. You know, as of today, the Dow's down still just around 10%. And the NYSE Composite, which I think is one of the most important gauges to watch in terms of U.S. markets—it’s right alongside the Value Line Geometric Index—but the NYSE Composite, actually, as of today, is down only about 7 to 8%. That NYSE Composite is a good gauge. It's a good sort of cross-section of the entire markets because it has all market caps in it. It has close to 2,000 stocks in it. All the sectors are represented. And so, I think that gives us a good picture of what the broader markets are really doing. So, when you look at it from that perspective, we could have more to go in this corrective effort, I think easily. And then, when we cross-reference that against, okay, well, 20% down—doesn't that equal bear market? Jim, I will tell you, I've always had a problem with people saying, well, a market only corrects if it goes down 10%, and you're only in a bear market if it goes down 20%. I never agreed with that sort of philosophy because what about a 5% correction? What about anything? Things mean different things to different investors. To a trader, a 2% correction is a correction, right? So, we look at different things when we talk about bear markets. You can go back through the history of the charts, and you could see we've had 20% corrections in stocks without prolonged bear markets. So, that's why I say a 20% correction in the stock market doesn't necessarily equate to a bear market. Because with a bear market, you always have to remember two things: it's price, and it's time. Time—it's time spent in that volatile period, that repricing, that downdraft. And so, bear markets have those two components. You get hit with price, and bear markets grind you down in time too. Bear markets take several months. Remember, we just got out of a cyclical bear market in 2022. It was throughout most of that whole year, and even small- and mid-caps bled into 2023. That's a bear market where you get hit in price, and you're grinding out time in that bear market. So, you know, 1987 was a 20% crash—or I think it was maybe even a 26% crash—in that day, Black Swan event. But what did the markets do? Was there a prolonged bear market there? No, it was a V-bottom, and I believe it was maybe eight months—it’s probably longer than that—but within a year, I think it was either approaching the prior highs, or you were starting to break out to new highs. So, to me, I have, you know, I don’t have a problem, from a technical basis, in saying that the S&P could go down further from here, and you could see that 20% threshold—down 20% on the S&P. You could see that threshold hit in the coming weeks or months.
Jim Puplava:
And one final question, if I may, Dan. Let's talk about Bitcoin and Pepto-Bismol.
Dan Wantrobski:
Bitcoin. So, listen, first of all, my firm—we don’t make official recommendations on Bitcoin. You know, that’s still a currency that—and some people don’t even consider that—not heavily regulated. But I can comment on the charts for sure.
Jim Puplava:
Yeah.
Dan Wantrobski:
On a long-term basis, we remain bullish on Bitcoin. We believe the charts there point to an eventual breakout of that 110 zone. And I think you could see 150, 180 within the coming year, if not more. I think there is a big pattern there. I’m not convinced that it’s a perfect negative correlator against the dollar index. You know, I’m not convinced this is going to replace a global reserve currency. But it has its place now. Over the short run, it is still acting very much like a risk asset and not a hedge against this volatility we’re seeing, right? The dollar is getting whacked here on all this capital flight and de-risking of the U.S., and the euro and the yen are beneficiaries, not Bitcoin, right? So, over the short run, as a risk asset, could Bitcoin get hit further? Yes. Right now, you’re on the 200-day moving average. So, our guess is that this breaks 80K again—80,000. I’m looking at the Bitcoin futures right now. I think if you get hit with that, you’re going to see 65 to 70 to 75 out of this. So, let’s see—it’s holding the 200-day today. It’s down about 5%, kind of in line with the larger-cap benchmarks, performing a little bit worse, in fact, Jim. But it’s, on a technical basis, it’s not completely falling apart. So, let’s see if it can hold. I’d be happy if it could hold north of 75K, right around this 80K zone. I think if it can, and we get some type of reversal, we’ll be in good shape. But this can get, you know, thrown into the mix of de-risking if the equity markets, you know, get hairier from here. So, just be careful. You could see a 75 print on Bitcoin. You could possibly see a 65 to 70K print on Bitcoin. Longer term, the charts, I think, are still bullish.
Jim Puplava:
All right, well, listen, Dan, as we close, if our listeners like to follow your work, tell them how they can do so.
Dan Wantrobski:
Sure. Best thing to do is shoot me an email. I’m at Janney. The email address is DWantrobski[at]janney[dot]com.
Jim Puplava:
All right, well, listen, Dan, as always, it’s a pleasure having you on the program. Take care, my friend, and hope to talk to you again.
Dan Wantrobski:
Thanks very much, Jim. Good talking to you.
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