Welcome to Thoughts on the Market.
I'm Mike Wilson, Morgan Stanley, CIO, and Chief U.S. Equity Strategist.
Today on the podcast I'll be discussing last week's volatility and what to expect going forward.
It's Monday, April 14th at 11.30 a.m. in New York, so let's get after it.
What a month for equity markets, and it's only halfway done.
Entering April,
we were much more focused on growth risks than inflation risks given the headwinds from AI CapEx growth deceleration,
fiscal slowing, doge, and immigration enforcement.
Terrorists were the final headwind to face.
And while most investors' confidence was low about how Liberation Day would play out,
positioning skewed more toward potential relief than disappointment.
That combination proved to be problematic when the details of the reciprocal tariffs were announced on April 2nd.
From that afternoon's highs, S&P 500 futures plunged by 16.5% into Monday morning.
Remarkably, no circuit breakers were triggered and markets functioned very well during this extreme stress.
However, we did observe some force selling as treasuries, gold, and defensive stocks were all down last Monday.
In my view, Monday was a classic capitulation day on heavy volume.
In fact,
I would go as far to say
that Monday will likely prove to be the momentum low for this correction that began back in December from most stocks and as far back as a year ago from any cyclical stocks.
This also means that we likely retest or break last week's price lows for the major indices,