MW With VIX echoing 2022 turmoil, here's a new theory on when Trump will change course

By Steve Goldstein

Michael Kantrowitz says stock multiples and credit spreads paint an uncertain picture

Markets are heading into a three-day beak - four in Europe - but rather than slink into the weekend, the action is as volatile as ever.

That's literally and not just figuratively the case: The VIX volatility index VIX has closed above 30 for the 10th consecutive session, the first time that's happened since Oct. 2022, which was the last gasp of the previous bear market.

That factoid leads neatly to the call of the day. Michael Kantrowitz, chief investment strategist at Piper Sandler, somewhat in jest thinks he has President Donald Trump's reaction function figured out.

He suggests the Trump put gets struck when the VIX volatility index surpasses the president's approval rating. In other words, it'll take the market getting even more turbulent - as well as Americans souring on his performance - before the White House backs down further in a meaningful way.

Kantrowitz in fact seems in a bit of a jovial mood, sharing his "ocular regression" - in other words, eyeballing things - to estimate that S&P 500 earnings estimates will drop by 6% by July. That's based on the idea that stocks typically lead earnings estimates by two to three months.

But even if his informal earnings estimate indicator is accurate, investors still may choose to ignore what it says.

"From here, the markets will continue to react to change in uncertainty and risk, mainly driven by policy headlines," he writes. "Increases in uncertainty will continue to pressure [price-to-earnings ratios] while a decrease can be thought of as fuel for P/E expansion. If we get a material change in Trump's policies, markets will see relief and look through the weak data that follows."

He also had an interesting chart, plotting S&P 500 price-to-earnings ratios vs. inverted credit-default swaps on U.S. high-yield. Right now, both the stock and bond market point to an uncertain status quo. Expect multiples to increase, and spreads to decline, if tariff de-escalate, and vice versa if they escalate.

The markets

After the 2.2% slide in the S&P 500 SPX, U.S. stock futures (ES00) (NQ00) were heading higher. The yield on the 10-year Treasury BX:TMUBMUSD10Y rose 3 basis points.

   Key asset performance                                                Last       5d      1m      YTD      1y 
   S&P 500                                                              5275.7     -3.32%  -7.04%  -10.30%  5.05% 
   Nasdaq Composite                                                     16,307.16  -4.78%  -8.13%  -15.55%  3.98% 
   10-year Treasury                                                     4.32       -11.60  8.50    -25.60   -31.10 
   Gold                                                                 3337.2     4.48%   9.32%   26.44%   39.38% 
   Oil                                                                  62.43      3.64%   -8.69%  -13.13%  -23.77% 
   Data: MarketWatch. Treasury yields change expressed in basis points 

The buzz

Trump said the U.S made "great progress" in Japanese trade talks, as Japan Economy Minister Ryosei Akazawa said the parties agreed to hold a second meeting this month and also said exchange rates were not part of the talks.

There's a flurry of data coming, with weekly jobless claims, the Philadelphia Fed manufacturing index and housing starts due for release. The European Central Bank is expected to cut interest rates.

Trump - remarking on the likelihood of an ECB rate cut - said Fed Chair Jerome Powell's termination cannot come fast enough.

Taiwan Semiconductor Manufacturing $(TSM)$ reported a forecast-beating 60% increase in first-quarter profit as the contract chip manufacturer said it hasn't seen customer behavior change from tariffs.

Jensen Huang, chief executive of Nvidia $(NVDA)$, arrived in Beijing for talks, two days after export curbs were unveiled.

Dow component UnitedHealth $(UNH)$ missed on earnings and cut its outlook.

Netflix earnings $(NFLX)$ are coming after the close. Read more about Netflix stock.

Hertz $(HTZ)$ kept surging, a day after Bill Ackman's Pershing Square disclosed a stake in the car-rental company.

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The chart

Truck driver pay is plummeting because there just aren't shipments to move after tariffs were imposed, according to this chart shared by Ryan Petersen, chief executive of Flexport, on X.

Top tickers

Here were the most active stock-market tickers on MarketWatch as of 6 a.m. Eastern.

   Ticker  Security name 
   NVDA    Nvidia 
   TSLA    Tesla 
   TSM     Taiwan Semiconductor Manufacturing 
   GME     GameStop 
   AAPL    Apple 
   PLTR    Palantir Technologies 
   AMZN    Amazon.com 
   HTZ     Hertz Global 
   HOLO    MicroCloud Hologram 
   INTC    Intel 

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-Steve Goldstein

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April 17, 2025 06:42 ET (10:42 GMT)

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