FX Evolution: Markets Are Crashing But Are Wall Street Buying?

Markets have had another volatile week, seeing massive daily moves and big intraday swings. The economic data this past week has turned sour. President Trump has made good on his plans to raise tariffs, which could impact global trade.

Plus, predictions for GDP are starting to turn lower. That’s due in part to rising tariffs, but also related to shrinking government spending. Either way, that’s leading to investors heading for the sidelines in the stock market.

As that happens, the market is deleveraging. That’s a good sign after hitting record total leverage at the end of January.

Meanwhile options flow and dark pool transaction data indicates that investors are staying cautious right now.

Growth-related stocks are showing the most weakness. Many well-known growth names from the past two years have seen the worst selloff. And some more defensive sectors, such as healthcare, have started to show signs of life.

Fortunately, this behavior looks more like a market rotation, if a somewhat aggressive one. We haven’t seen credit spread yields indicate an immediate economic danger. And financial stocks continue to hold up well.

That points towards markets being in the later stages of a bull market, rather than the start of a full-on selloff. However, if the data starts to materially deteriorate, that could change quickly.

For now, caution and defensive investing is the name of the game.

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