Yahoo Finance

US stocks rally for a second day, investors focusing on tech’s temporary reprieve from Trump’s tariffs. Yahoo finance’s Jared Blikre joins us now with the trading day takeaways, Jared.

Thank you, Josh. Stocks closed in the green, but we got to talk about something that happened today in the technicals. That is a death cross. And I’m going to show you what happened. This isn’t the S&P 500. We actually had one in the NASDAQ a few days ago, and I’m going to use a little-known feature of the YFI interactive that produces moving averages. So that is a 200-day on this year-to-date chart of the S&P 500, Josh. Now, I’m going to put the 50-day and you can see this is coming down from a higher space, and we are just crossing it today. So, typically, this is kind of a hair bender, a hair bender of, uh, more downside prices. And a lot of times you can see especially in the S&P 500 above the 200-day for some people is more like a bull market, and below is a bear market. These aren’t definitions, but just kind of rough guidelines here. And I do have some stats on how this, how the market evolves going forward. And so, I went all the way back to about 1961. I found 32 instances of these so-called death crosses, and here are the stats: one day, one week, one month, one quarter and one year out. So, it’s actually mostly green. One day out you see a negative .05%, that’s a very small loss, but a week later, it tends to be higher by two-thirds, and then a month later by about half a quarter 3%. So, what’s going on here, uh, the stocks tend to go up. And so, I also have percent positive here, 47 53 50. Anything under 70 actually isn’t that bullish because, uh, if stocks are going up about 70% of the time, and according to this pattern, it’s only 47. Well, guess what? That’s a little bit of a problem there.

Go on.

So, bottom line here, uh, we are expecting probably more downside price action, but, uh, not a catastrophe.

So, so you look at the death cross. It’s a sign of the apocalypse. The zombie apocalypse is here. You stock up on ammo, beef jerky.

Yeah, you know, you could do that. Or you can look at the VIX which came down to about the 30 level today. That’s kind of a reprieve. It was at 60 last week. So, that tells me things are getting a little bit better.

Point number two. We got to talk about the R-word, which is recession. And I’m going to invoke Michael Gapen. He is the chief US economist over at Morgan Stanley, just interviewed him for an episode of Stocks and Translation dropping tomorrow, Tuesday. Here’s what he had to say about what he’s watching for this potential recession.

The real risk, as you mentioned, is an asset price shock. Because upper-income households, we’re talking about roughly the top 20% of income-earning households, sit on a majority of the wealth, and they also account for 40 to 50% of total spending. So, I, I think what stands out right now in the US economy is still the level of its asset prices. It’s not a leverage bubble. It’s not an overinvestment cycle. So, I think the real risk is if the noise and uncertainty around trade policy causes equity valuations to fall. Does that upper-income household say, hmm, maybe we should spend a little less and save more?

All right. So, he’s watching for an asset price shock. Basically, that’s a big decline in stock market price, stock prices or it could be real estate, some other things. But, uh, just the decline that we’ve already had, uh, I think if you were to pierce that 4800 level in the S&P 500 that I’ve talked about a bunch of times, basically, the low for this cycle. If you were to go down there, that, in itself, could tip the economy into recession because wealthier people would not spend as much. So, he’s watching that dynamic.

You want to end here on the dollar?

Ooh! We’ve been talking to strategists all show about.

You know what we haven’t watched in a while?

Watch the dollar. We haven’t. I haven’t said that in a while. Um, let me just chart this because I think the dollar’s price action has been really interesting. This is the S&P 500 again, and we will scroll down to the US dollar index. But guess what? That’s a very similar chart. Um, a lot of times when the dollar goes down, especially in the bull market that started in October of 2022, that has been risk-on. So, the thing is, a lot of correlations change when we have these shocks in the system. Now, I’m going to show you a six-year chart so I can show you that. This is the lowest price in the Dixie. That’s what it’s called. The US dollar index since, what is that? 2022. So basically, three years. Now, the dollar likes to trade in ranges for long periods of time. A lot of times, it’ll just kind of poke above or poke below and then re-enter the range. So, we have gone below, and if we were to do this again, if we were to go higher, guess what? That could put any kind of kibosh on this nascent recovery we have in assets. So, I’m watching the dollar to figure out what stocks are going to do next and again watching that 4800 level in the S&P 500.

Now, and just finally, what assets would you call out that had benefited from this weaker greenback?

I’m going to show you gold here. So, in general, the precious metals, even copper as well, industrial metals have done well. Copper. So, gold is down a little bit today. Let me just show you a three-year chart here, and you’re going to see that. This is just really took off at the beginning of 2024. It was going up before then, um, and has accelerated now. So, gold futures, what is that? Uh, 3226. I’m not sure. That looks to be about right. So, 3226. That is a lot higher. Um, I’m going to show you a max chart so we can go back to the beginning of the century there. And we’ve seen gold really go on some tears in the wake of the global financial crisis and the wake of the pandemic, and now in the wake of whatever we’re experiencing with tariffs.

Jared, thank you, buddy. Appreciate it.

You bet.