10.04.25 - Historic day to remember

Yesterday, US markets posted one of the strongest intraday gains in history, with the Nasdaq surging over 12%, its biggest rally since 2001 and the second-best day on record. The sharp rebound came after US President Donald Trump announced a 90-day pause on some tariffs, sparking a wave of investor optimism and aggressive short-covering across sectors.

Markets: Nasdaq Index gained more than 12%, Dow Jones Index almost 8% while S&P 500 Index jumped 9.5%. Together with the stock markets, cryptos and commodities rallied, interest rates took a breather with 10-year yields back to 4.35% after hitting briefly 4.5% intraday, while the US dollar gained back some ground. Gold was able to defend its intraday increase of 3%.

My view: We have just witnessed one of the most volatile short-term periods in market history, marked by extreme swings and, remarkably, driven largely by the actions and statements of a single individual. The sheer scale of market impact from such announcements is unprecedented and gives more than just a hint of insider dynamics at play.

Many institutions were caught off guard, myself included, at least to some extent. In response, I made gradual adjustments to the portfolio starting this week. Just a bit ahead of yesterday’s major announcement, I closed out the long volatility position and rotated directly into a short volatility ETF, positioning for a potential cooldown in market turbulence after volatility had reached extreme levels. It was just the right timing.

Markets are celebrating, but many seem to overlook that the tariffs have not been removed, only paused for 90 days. The uncertainty remains high, particularly for companies that have already started adjusting their strategies in response to the initial tariffs.

One pressing question: what happens to goods imported yesterday that were technically subject to the new reciprocal tariffs? There is still no clear guidance, highlighting just how chaotic and unpredictable this environment has become.

Based on this remaining high uncertainties and unpredictability, I am not sure how sustainable this super-rally really is. Should volatility levels begin to normalize, there is a stronger chance I will pivot back to a long volatility position. The underlying uncertainty has not disappeared, it might simply be delayed.

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