Bill Ackman's call for a '90-day time out'; Why I'm getting more bullish; Missing the market's best days can be costly; 'Slow and boring' is easing the pain in the markets

1) After the brutal two days in the markets on Thursday and Friday, the question on everyone's mind is: What's next?

The short answer is: I don't feel like I have a unique insight into what President Donald Trump's administration is likely to do next, how other countries will react, etc. – though I do tend to think my college buddy and billionaire Bill Ackman of Pershing Square gives good advice in this extended post on social platform X from yesterday. Excerpt:

The country is 100% behind the president on fixing a global system of tariffs that has disadvantaged the country. But, business is a confidence game and confidence depends on trust.

[President Donald Trump] has elevated the tariff issue to the most important geopolitical issue in the world, and he has gotten everyone's attention. So far, so good.

And yes, other nations have taken advantage of the U.S. by protecting their home industries at the expense of millions of our jobs and economic growth in our country.

That said, as Ackman continues in the post:

But, by placing massive and disproportionate tariffs on our friends and our enemies alike and thereby launching a global economic war against the whole world at once, we are in the process of destroying confidence in our country as a trading partner, as a place to do business, and as a market to invest capital.

The president has an opportunity to call a 90-day time out, negotiate and resolve unfair asymmetric tariff deals, and induce trillions of dollars of new investment in our country.

If, on the other hand, on April 9th we launch economic nuclear war on every country in the world, business investment will grind to a halt, consumers will close their wallets and pocket books, and we will severely damage our reputation with the rest of the world that will take years and potentially decades to rehabilitate.

(Ackman also shared some follow-up thoughts in another post on X here.)

2) Meanwhile, I'm getting more bullish on stocks – for a number of reasons...

First, this is the sixth-worst start to a year for the S&P 500 Index since 1928 – and, as you can see in this table (courtesy of Creative Planning's Charlie Bilello from his latest Week in Charts blog post), of the 19 other worst starts to a year, the S&P 500 has risen over the remainder of the year 14 times:

In addition, the CBOE Volatility Index ("VIX") – the so-called "fear gauge" – reached 45 on Friday. That's a very rare occurrence, as you can see in this 20-year chart:

The three previous peaks in 2008, 2011, and 2020 were all fabulous long-term buying opportunities.

And as the table in this post on X shows, the S&P 500's short-term returns when the VIX hits 45 have been remarkable as well:

And here's another analysis in a chart from a different post on X showing the six-month returns for the S&P 500 with the VIX at different starting points (note that the red bar is highlighted based on Thursday's close at 30.02, but the far-right bar is now the starting point, with the VIX closing at 45.31 on Friday):

Also note that, as the below Creative Planning chart from a post on X shows, consumer expectations are at their lowest level in 12 years – it was a great time to buy back then:

And led by the crash of the "Magnificent Seven" mega-cap stocks this year, the price-to-earnings ratio of the tech-heavy Nasdaq 100 Index is back to around its 10-year average. In the Bloomberg chart below from this post on X, you can see the move lower even before the further declines at the end of last week:

3) Offsetting these bullish indicators is this data on the two-day plunge in the price of oil, which historically has indicated an upcoming recession. As Bilello noted in his latest Week in Charts post:

Crude Oil fell 13.6% on Thursday-Friday of last week, one of the biggest 2-day declines in history.

In the past, big short-term declines have often coincided with recessions (see 1990-91, 2020, 2008-09) as investors anticipated a collapse in demand.

The three exceptions in the table below: 1986, 2021, and 2022.

And here's the relevant table he shared:

I'll also note that the real-money bettors on Polymarket now think there's a nearly 60% chance of a recession this year.

4) All that said, I also know that trying to jump in and out of the market can be very costly...

As this analysis by Hartford Funds shows, over the past 30 years, if you were out of the market for its 10 best days, your total returns fell by 54%. And if you missed the 30 best days – an average of one per year – your returns fell by 83%!

5) In this article, New York Times columnist Jeff Sommer highlights the benefits of a well-diversified portfolio: In Worst Stock Market in Years, Slow and Boring Has Eased the Pain. Excerpt:

I'm hedging my bets, as I indicated in last week's column – with a well-diversified portfolio containing low-cost index funds that track just about all tradable global stock and bond markets. That kind of portfolio did rather well in the last quarter, at least compared with domestic stock funds.

The Returns

Here are some of the average numbers for the quarter, reported by Morningstar:

• Domestic stock funds: Down 4.2 percent.
• Taxable bond funds: Up 1.9 percent.
• Municipal bond funds: Down 0.2 percent.
• International stock funds: Up 4.7 percent.

• Diversified asset allocation funds with 30 to 50 percent stock and most of the remainder in bonds: Up 1 percent.

During times of market turmoil, the temptation is to do something dramatic, but that's usually a mistake. Instead, I plan to sit tight and look for the best stocks I can find that look compelling enough to start nibbling on.

I'll be discussing some of them in upcoming e-mails, so stay tuned!

Best regards,

Whitney

P.S. I welcome your feedback – send me an e-mail by clicking here.