The T Word

If we were living in an old episode of the Brady Bunch Jan might be saying , “Tariffs, Tariffs, Tariffs”. The market just finished a better-than-expected earning cycle, but tariffs seem to be the only headline that matters these days. Scott Bauer joins us to break down the past few days of the market and where it may be headed.

Summary – IBKR Podcasts Ep. 262

The following is a summary of a live audio recording and may contain errors in spelling or grammar. Although IBKR has edited for clarity no material changes have been made.

Jeff Praissman

Hi everyone. Welcome to Interactive Brokers Midweek, look at the markets. I’m Jeff Praissman. It’s my pleasure to welcome back to our podcast, Scott Bauer, the CEO of Prosper Trading Academy. Hey Scott, how are you?

Scott Bauer

Jeff, I am Great. How about you?

Jeff Praissman

I’m doing well. I’m doing well. And we, we’re just coming off another, holiday shorten week, which is always good to have that extra day off.

Scott Bauer

Seems like we have a lot of these.

Jeff Praissman

I know it’s the season, right? With summer, you, you’ve kind of hit those spots where we have, I think four, four of them. And I’m never going to complain about a day off.

But as usual though, even with the day off, there’s no shortage of news, but it always keeps coming down to one word, tariffs, how has the market been reacting and where do you think it’s heading over the next few days?

Scott Bauer

I, I mean, all we need to do is just look at the headlines, right? Look at the end of last week, when the announcement came out about 50% on Europe. The market didn’t like it, going into the long weekend, you know, the market was on a, a negative note and then the news changed over the weekend that was going to be extended out. And we’ve seen the market back on, on rally mode a little bit here. It’s really difficult to kind of predict where the market, in my estimation is going based on this news flow.

I mean, I’ve been cautiously optimistic and I with, where volatility has come so quickly from where it was four weeks ago, six weeks ago. To me, especially if you want to stay, long in this market or you want to stay somewhat bullish in this market, it would be really prudent to buy some volatility by some cheap protection.

Jeff Praissman

I was going say that, that kind of leads me into my next question. Talking about the VIX, it’s been as high as almost 26. It’s dipped slightly under 18. This is just in the last, four or five trading days.

Scott Bauer

Yep.

Jeff Praissman

It’s hovering around 19 right now. It sounds like you think it may be heading, possibly a little bit higher over the next few days.  Might be a good idea to buy a little bit.

Scott Bauer

It’s not so much that maybe, I believe it’s going back to 25 or 30 or higher, but I just think that we are in right now, that the VIX kind of has this floor to it just because of the news cycle. Even though, you know, earnings are finished here or almost finished, the news cycle’s not going away, right?

That magic word tariff is not going away. And I think, in some regards, just that overhang right there is going to keep the VIX elevated. Now, if we looked at the VIX historically, and we’d look at it at 19, right now, we’d say, boy, that’s expensive historically. Right. But for this period of time right here, I think it’s prudent to actually have a little bit, if you’re going to remain in the market.

Jeff Praissman

And, as you said, earning season’s, pretty much winding down. The results have actually been pretty positive overall, and, and I think, better than people may be expected, throughout the market. But there’s also, a noticeable lack of, future forecasting by several companies like Ford and Delta, who aren’t even, these are big companies. They’re not even sharing financial outlooks for the upcoming year. Do you think the market’s just adapting to this new normal?

Scott Bauer

There’s no question about it. And we see the ebbs and flows and we see that happen. It’s almost psychological, right? When that first news flow hits something that is new, the market gets unnerved a little bit, and then the more that happens, the more that happens. We become a little bit desensitized to that news flow.

And I think that’s exactly what is happening here. Now that doesn’t remove any potential. Threat or any sort of shock that may happen, but I think it’s normal that we do become more accustomed to it, which I think when you think about it that way, makes it even more prudent to maybe have a little protection in the marketplace.

Jeff Praissman

And, our final question, it’s Wednesday, May 28th. Any big market or economic events on their horizon that are listeners, should, pay attention to?

Scott Bauer

Well, you know, besides Nvidia earnings and a couple other big ones, we have Fed minutes, and we certainly have at the end of this week, some really big important inflation data and that could really set this market up for a next move, one direction or the other if we see that inflation still is maybe ebbing a little bit because there’s a lot of, there’s a lot of talk, there’s a lot of thought out there that, if the tariffs do come to light and maybe the new tax bill that we could see inflation actually rising a little bit.

So, the PCE numbers we’re going to get, I think, are going to be very, very significant.

Jeff Praissman

Scott, thanks again for swinging by the studio. For our listeners, you can find more from Scott and our other contributors on our website, under ibkr.com, under education, as well as going to prospertrading.com. For more from Scott as well. Thanks, Scott. Until next time.

Scott Bauer

Really appreciate it, Jeff.

Jeff Praissman

Our pleasure!