Market Relief Bounce is Sold - week ending 28/03/2025

Markets Performance

Markets kicked off the week with a burst of optimism, but by Friday, that bounce had fully reversed into a broad-based selloff. The rally corresponded to the seasonality cycle and coincided with deeply oversold conditions, with most depressed stocks like Tesla (TSLA) having the biggest bounce backs, all as we indicated in our prior newsletter.

SPY rallied sharply Monday (+1.8%) after former President Trump made unexpectedly measured comments about upcoming auto tariffs the week prior, hinting they could be applied “leniently” — a shift that eased trade war fears and sparked a powerful intraday reversal. That optimism carried over into Tuesday’s session, with the S&P 500 climbing further above its 200-day moving average, though under the surface, market breadth remained weak and cyclical leadership began to falter. Early-week gains were concentrated in mega cap tech, AI beneficiaries, and semiconductors, but sentiment quickly soured midweek as macro conditions reasserted themselves. Trump’s confirmation of a 25% tariff on all imported vehicles and parts, set to begin April 2, reignited inflationary concerns, just as incoming data revealed firmer-than-expected durable goods orders, rising personal income, and declining consumer confidence.

The week’s reversal intensified from Wednesday onward. Sticky inflation readings, hawkish Fed rhetoric, and a sharp drop in long-term inflation expectations led to renewed stagflation fears. The S&P 500 ETF (SPY) ended the week down -3.2%, breaking below its aforementioned 560 gamma put zone where selling intensified on Friday. Nasdaq 100 (QQQ) fell -4.4%, and small caps (IWM) dropped -4.0% — with all major indices now negative year-to-date. Technology (-3.7%) and Discretionary led the decline, while Staples (+1.7%) and Utilities outperformed as investors rotated defensively. Gold surged +3.0%, reflecting a clear hedge demand against policy inertia and tail risk. Credit markets began to flash caution as well: the ICE BofA U.S. High Yield Index OAS widened to 3.27% from 3.17% last week — a meaningful move, albeit at historically low levels not seen since pre-GFC, that reflects rising credit risk aversion even as equities stumble. Treasuries were flat, with 10Y futures (ZNUSD) edging up +0.1%, offering little offset to the equity volatility.

Taken together, this week marked a clear sentiment shift: not just a failed bounce, but a structural break lower, with both technical and macro factors driving renewed bearish momentum into quarter-end.

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This investment thesis is prepared by Altai Capital for informational and analytical purposes. Investors should conduct independent due diligence and consult with financial advisors before making investment decisions. Past performance and historical precedents do not guarantee future results. Altai Capital’s portfolio may contain the mentioned security and thus this publication have vested interests.