A look back at 2018 suggests that stocks likely rally post-tariff announcement (4/2) driven by likely drop in VIX (volatility) Array ( [cookie] => 6446c9-54f8b0-083d77-b2f9e8-90a880 [current_usage] => 1 [max_usage] => 2 [current_usage_crypto] => 0 [max_usage_crypto] => 2 [lock] => [message] => [error] => [active_member] => 0 [subscriber] => 0 [role] => [visitor_id] => 0 [reason] => Usage under limits [method] => ) 1 and can accesss 1

VIDEO: We look at back at 2018 and we see stocks recovered from tariff news and rallied strongly.  One of the fuels in 2025 is we see the possibility of a sizable drop in the VIX across all future expirations.

Please click below to view our Macro Minute (duration: 5:27).

As the week winds down, equity markets continue to grapple with persistent uncertainties, but there are still several constructive forces in play. One area of particular focus is the potential for equities to rally despite the looming tariff announcement, echoing patterns seen in past cycles including Trump 1.0.

• Historically, tariff-related drawdowns have not been long-lasting and have presented buying opportunities. In 2018, markets were rattled by President Trump’s initial tariff threats at Davos, leading to a 12% decline in the S&P 500 over 10 days. This was followed by another 9% pullback after the formal tariff announcement in March. However, by September, the S&P 500 had not only fully recovered but was up 9% year-to-date. Despite this rally, markets later declined sharply after Fed Chair Powell’s “a long way from neutral” comment in October, which triggered a hawkish reaction and led to a 20% drop. Importantly, the deeper damage to stocks stemmed from the Fed’s tightening policy, not tariffs.
  
• Fast forward to 2025, and the setup appears somewhat parallel, though with key differences that may limit downside risk. This year, the S&P 500 began with a 5% rally before declining 10% over 20 days following new tariff rhetoric on February 19th. The current correction, much like in 2018, could set the stage for a rebound if the market perceives an eventual tariff resolution as palatable. Crucially, unlike 2018, today’s backdrop is supported by a Fed that is already dovish, with the Fed Funds rate at 4.5% compared to 1.5% back then, and cuts on the horizon.
  
• The combination of accommodative monetary policy and tariff resolution potential creates a unique “Trump put” and “Fed put” dynamic. This dual support mechanism could drive a strong equity rebound once clarity around tariffs emerges. Volatility expectations seem to validate this setup. The VIX futures curve currently shows elevated near-term volatility around the April 2nd tariff deadline, but a sharp decline in volatility is priced in for the months that follow. This suggests markets are bracing for short-term uncertainty but anticipate calmer waters thereafter.
  
• A historical lens reinforces this volatility thesis. Leading into the 2024 Presidential election, a similar elevated VIX curve collapsed after President Trump’s victory was confirmed in early November, unleashing risk appetite and fueling a rally. A repeat of this pattern in response to tariff clarity could catalyze another leg higher for equities.
  
• Mark Newton notes that technical conditions are also improving, supporting the case for a bottom. The market has reclaimed the 50-day moving average, and Newton is closely watching for a close above 5,703 on the S&P 500 as confirmation of a bullish trend reversal. Furthermore, the 10% pullback in just 20 days ranks as the 5th fastest decline since 1950. Historically, such rapid drawdowns tend to be market shocks rather than the onset of prolonged bear markets, often leading to strong gains over subsequent 1, 3, 6, and 12-month periods.
  
  

Bottom Line: Ultimately, while risks remain—primarily around the terms of the tariff deal—the weight of evidence favors resilience and recovery as both monetary policy and market technicals are leaning constructive

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Key incoming data March:

• 3/3 9:45 AM ET: Feb F S&P Global Manufacturing PMI Tame
• 3/3 10:00 AM ET: Feb ISM Manufacturing PMI Tame
• 3/5 9:45 AM ET: Feb F S&P Global Services PMI Tame
• 3/5 10:00 AM ET: Feb ISM Services PMI Tame
• 3/5 10:00 AM ET: Jan F Durable Goods Orders Tame
• 3/5 2:00 PM ET: Mar Fed Releases Beige Book Tame
• 3/6 8:30 AM ET: 4Q F Non-Farm Productivity Tame
• 3/6 8:30 AM ET: Jan Trade Balance Tame
• 3/6 8:30 AM ET: 4Q F Unit Labor Costs Tame
• 3/7 8:30 AM ET: Feb Non-Farm Payrolls Tame
• 3/7 9:00 AM ET: Feb F Manheim Used Vehicle index Tame
• 3/10 11:00 AM ET: Feb NY Fed 1yr Inf Exp Tame
• 3/11 6:00 AM ET: Feb Small Business Optimism Survey Tame
• 3/11 10:00 AM ET: Jan JOLTS Job Openings Tame
• 3/12 8:30 AM ET: Feb CPI Tame
• 3/13 8:30 AM ET: Feb PPI Tame
• 3/14 10:00 AM ET: Mar P U. Mich. Sentiment and Inflation Expectation Hot
• 3/17 8:30 AM ET: Feb Retail Sales Data Tame
• 3/17 8:30 AM ET: Mar Empire Manufacturing Survey Tame
• 3/17 10:00 AM ET: Mar NAHB Housing Market Index Tame
• 3/19 9:00 AM ET: Mar M Manheim Used Vehicle index Tame
• 3/19 2:00 PM ET: Mar FOMC Decision Dovish
• 3/19 4:00 PM ET: Jan Net TIC Flows Tame
• 3/20 8:30 AM ET: Mar Philly Fed Business Outlook Tame
• 3/20 10:00 AM ET: Feb Existing Home Sales Tame
• 3/24 8:30 AM ET: Feb Chicago Fed Nat Activity Index
• 3/24 9:45 AM ET: Mar P S&P Global Manufacturing PMI
• 3/24 9:45 AM ET: Mar P S&P Global Services PMI
• 3/25 9:00 AM ET: Jan S&P CoreLogic CS home price
• 3/25 10:00 AM ET: Mar Conference Board Consumer Confidence
• 3/25 10:00 AM ET: Feb New Home Sales
• 3/26 10:00 AM ET: Feb p Durable Goods Orders
• 3/27 8:30 AM ET: 4Q T GDP
• 3/28 8:30 AM ET: Feb PCE Deflator
• 3/28 10:00 AM ET: Mar F U. Mich. Sentiment and Inflation Expectation
• 3/31 10:30 AM ET: Mar Dallas Fed Manuf. Activity Survey

Economic Data Performance Tracker 2025:

Economic Data Performance Tracker 2024:

Economic Data Performance Tracker 2023: