Control Panel: Wild & Crazy settling down?

Investment Analysis Clubs Macro Economic Trends and Risks
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The wild market swings of the past couple of weeks settled down somewhat last week. The intense negative reaction to the Trump administration’s actions can be seen in the drop of the SPX starting in February. The administration reacted like a kid who touched a hot stove but didn’t necessarily learn his lesson. To announce that tariffs will be delayed 90 days and “negotiated” is not the same as saying they will not be imposed.

Only time will tell if and when the stock market’s trend reversal from positive growth to negative will reverse back to positive. At the moment the bounce back is just noise.

The outcome of tariffs hasn’t bitten yet. There’s still inventory from the pre-tariff days. It will take time for the shelves to empty as they did in 2000 and for the laid-off government workers to officially become unemployed in September. Initial unemployment claims are still very low.

The markets bounced back because investors are always optimistic. The Fear & Greed Index bounced up from Extreme Fear to Fear. Stocks and junk bonds gained against Treasuries, showing more risk-on behavior. Treasuries, USD and gold stabilized. The Chicago Fed’s National Financial Conditions Index (NFCI), which provides a comprehensive weekly update on U.S. financial conditions in money markets, debt and equity markets, and the traditional and “shadow” banking systems, continued a tightening trend that began in February 2025. This more directly impacts real-world borrowing than Treasuries.

The Atlanta Fed’s GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the first quarter of 2025 was -2.5 percent on April 24, down from -2.2 percent on April 17. The alternative model forecast, which adjusts for imports and exports of gold as described here, is -0.4 percent.

The chaos in Washington, DC is impacting ordinary consumer decisions. A “no-buy” minimalist movement is growing which could cause a recession if it deepens. (Frankly, we would hardly have an economy if everyone LBYM’ed like DH and me.)

https://www.nytimes.com/2025/04/25/business/no-buy-tiktok-recession-tariffs.html

More important, people are taking Social Security early.
https://www.wsj.com/personal-finance/retirement/social-security-benefits-early-trump-changes-27ecd4ee?mod=hp_listc_pos2

Americans Are Claiming Social Security Early, Fearful of Its Future

Waiting to start drawing benefits typically leads to a bigger monthly check, but many don’t want to wait right now

By Anne Tergesen, The Wall Street Journal, April 26, 2025

Americans anxious about the future of Social Security are claiming their benefits earlier than planned, even though it can mean less income over the rest of their lives…

Many effects of the Trump administration’s swift and sweeping changes to federal agencies aren’t yet apparent, but with Social Security, they are already changing households’ financial decisions. Americans have long been anxious about Social Security’s stability, and Trump’s second term is heightening those anxieties…

Social Security’s finances have long been under pressure because of the aging of the population. Unless Congress shores up the retirement program, it is projected to deplete its reserves in 2033, which would trigger a 21% reduction in benefits. … The agency said 82% of benefits were processed on time in March…

Benefits starting at 70 are 76% higher than at 62, according to Laurence Kotlikoff, a Boston University economist and founder of Maximize My Social Security. A person who postpones benefits until 70 instead of 62 would come out ahead if they live to at least 80… [end quote]

DH and I took Social Security at age 62 because health issues make it unlikely that we will live to age 80. (My break-even analysis said age 83.) When to begin Social Security is a personal decision with many inputs but a trend for people to take early SS unnecessarily points to uneasiness with the government. Lower income will dampen future consumer spending which accounts for 70% of the economy.

The METAR for next week is cloudy. It’s impossible to say what cockamamie news will swing the market.
Wendy

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Wendy, thank you for peering into chaos in a rational manner and continuing to post truly thoughtful Control Panel Posts. I read every word.

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Would you buy insurance from a company about to go broke?

I like charts…

S&P 500

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NASDAQ

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What Is a Death Cross?

The “death cross” market chart pattern refers to the drop of a short-term moving average—meaning the average of recent closing prices for a stock, stock index, commodity, or cryptocurrency over a set period of time—below a longer-term moving average. The most closely watched stock-market moving averages are the 50-day and the 200-day.

Despite its ominous name, the death cross is not a market milestone worth dreading. Market history suggests it tends to precede a near-term rebound with above-average returns.

  • SPX, early March
  • NASDAQ, late February

What Is a Golden Cross?

A golden cross is a chart pattern in which a relatively short-term moving average crosses above a long-term moving average. It is a bullish breakout pattern that forms when a security’s short-term moving average (such as the 50-day moving average) crosses above its long-term moving average (such as the 200-day moving average) or resistance level. The golden cross indicates the possibility of a long-term bull market emerging. High trading volumes generally reinforce the indicator.

Both the S&P 500 and NASDAQ are above their 50 day SMAs (late April). By mid year we could see Golden Crosses, good signs that the bottom is in.

My covered calls are reaching and passing their strike prices.

o o o o o o o o o o o o o o o o o o

The difference between the Stock Market and the Economy is that the lower the market goes the more valuable and desirable it becomes.

The Captain

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So we’ll need another Death Cross prior to your anticipated mid year Golden Crosses?

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Dear Wendy,

I had family over for lunch yesterday. The discussion turned to their move to the Cambridge MA area. They are getting rid of their TVs and buying another TV to get a Smart TV that can take apps.

It was buy a HDTV yesterday before all the shelves were emptied. We studied the topic with Costco.com and Amazon.com Costco stated over the phone they were not getting more HDTVs in as of now. They shipped it to family in the area.

The shelves are about to go empty.

I had cod cakes, oil-less french fries, corn on the cob up from the south, and Dekopon oranges for dessert. Wonderful time.

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Why not use an antenna? There should be a sufficient number of stations available over the air in that area. Did they get a TV with an ATSC 3.0 tuner, as that is the coming thing, for over the air, if the industry gets it’s act together and actually makes the switchover.

If you buy a Samsung TV, you get access to Samsung’s free streaming service. Otherwise, you can stream Pluto, which is also free.

fwiw, the only things worth watching on TV are Hogan’s Heroes reruns, and the news. Other programs and movies worth watching are pretty rare.

Of late, I have noticed some of my DVDs are starting to rot. 20 years seems to be the limit, before they become unreadable.

I’m presently working my way through my DVD set of “The Adventures Of Brisco County Jr”.

Steve

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Movies and interesting shows on netflix…etc…

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I fired Comcast in 2010, because there wasn’t anything worth Comcast’s continually escalating prices, continually deteriorating service quality, and scummy business practices.

Steve

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There is something about Boston does not have Comcast and the rest of them up there are much better services.

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Well, with Social Security I took a slightly different approach. Because I was concerned about its viability at the time, I signed my wife up at 62 (figuring the break-even on benefits, excluding interest, etc. was at age 83). I retired early and claimed spousal benefits from her account until I signed up at age 70.

As far as the market is concerned, my overall profit is approaching its all-time high point (despite my reducing the size of my portfolio a number of months go). I am trying to judge when it will be time to trim much of my US equity portfolio as I don’t see a high likelihood that the next few year’s growth will match those of the last few years. When I decide to come back into the market, I feel that foreign stocks may outperform US ones (I am already more than 50% foreign holdings).

Jeff

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As per Kitces below, it is generally better for the higher-earning spouse to delay, but to for the lower-earning spouse to claim early. If the higher income spouse dies first, the lower income spouse can claim the higher survivor’s benefit, which likely erases the benefits of lower spouse delaying. So the early/delay strategy makes sense for that reason.

If the lower income spouse dies and claimed early, the higher income spouse already has the higher benefit, plus got the utility of the money from lower income spouse early claim. So the early/delay strategy makes sense for that reason too.

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How so? Could you, please, explain?

The Captain

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Oops! My bad…
Read 20 day in your charts as having an extra zero. Time to bump the cheaters up a notch.:nerd_face:
That said, I’ve found your covered call for income writings quite informative. I’ve used a manual, albeit much simpler, system for a number of years with reasonable success. The recent rise in volatility has certainly made for interesting times. Thanks for sharing!

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Shift Happens! :slightly_smiling_face:

My pleasure!

The Captain

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