Lagged Move or Canary in the Coal Mine?

Daily Updates:

• Over the weekend, there was a growing sentiment for a so-called 1987 Black Monday repeat when the US stock market opens later today. Back then, the S&P 500 fell 28% in the space of a week. So what exactly has happened between Friday and today for market expectations to mirror such sentiment?

• Going into the weekend, a stronger-than-expected job market report did very little to change market sentiment. March’s NFP report showed the US economy added a blockbuster 228K jobs, against an expected 140K. Even when factoring in the downward revisions over the past 2 months, that number was still 40K higher than expected. The report was however met with a 10bps increase in the unemployment rate to 4.2%. 
• That NFP report was also for the most part trumped by China announcing 34% retaliatory tariffs against the US starting April 10, matching President Trump’s ‘reciprocal tariffs’. 
• Ultimately, Friday ended with the S&P 500 having its worst two day performance since 2020, closing -5.97% on the day while the Nasdaq-100 officially slid into a bear market. 
• While equities and the MAG7 took a beating and even gold was down, BTC did not fall. It opened Friday at $82K and closed at $84K. In fact, over Friday and the first half of the weekend. BTC had begun to show patterns of the decorrelation we had suggested could be possible in the future here. 
• That too was matched by Treasury Secretary Bessent stating that “Bitcoin is becoming a store of value”. 

• However by Sunday evening, BTC had gone from signalling a breaking of its correlation with risk-on assets to potentially becoming the canary in the coal mine for Monday’s market open. 
• Commerce Secretary Lutnick announced that “the tariffs are coming”, smashing all hopes of a tariff delay before Monday. Following that announcement, the crypto market began to fall. Since then, BTC is currently trading at $75K (-9% on the day), ETH has fallen below $1,600 for the first time since October 2023 (-17%) and Solana is flirting with the $100 level (-17%).
• ETH valued in BTC terms is now at its lowest in 5 years (see below). 
• In derivatives markets, BTC’s term structure has firmly re-inverted, with 7-day ATM IV spiking to its highest levels since early March. Puts are in significant demand with BTC’s 25delta skew briefly dropping to its lowest since March (a level that, excluding March, was last seen in April 2024). 
• At-the-money implied volatility for ETH at the front-end has equally risen beyond 100%, even higher than the August 2024 yen unwind period and only slightly below the IV levels reached during Trump’s February tariff announcement. 

• S&P 500 and Nasdaq-100 futures are currently down 4% and 5% respectively. China’s Shanghai Composite Index and Japan’s Nikkei 225 are both down 7% and the Hong Kong Hang Seng index has fallen by its most since 2008 as the fallout from tariffs extends across the world. 
• President Trump’s response so far? “I don’t want anything to go down, but sometimes you have to take medicine to fix something” and “forget markets for a second, we have all the advantages”. So far his administration’s focus has been on the 10 year treasury yield: “He and I are focused on the 10-year Treasury [yield]” – Scott Bessent.  

• Separately, Trump’s negotiation tactic of economic warfare has resulted in a number of countries pledging to remove their tariffs against the US. Taiwan, Vietnam and Zimbabwe all plan to offer zero percent tariffs, though larger trade partners such as the EU and China have already made retaliatory plans.

This Week’s Calendar:

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Charts of the Day: