Tariff wars: when comparing 2025 to 2018, markets flipped to pessimistic far faster — only weeks in 2025 vs months in 2018

VIDEO: During Trump 1.0, equities bottomed when VIX surged and sentiment flipped negative. Took months in 2018 but only weeks in 2025

Please click below to view our Macro Minute (duration: 7:30).

Stocks have been rallying for two weeks, and while this strength may be difficult for many investors to reconcile amid prevailing skepticism, we believe equities bottomed on March 13th following a 10% drawdown. Many market participants remain cautious ahead of April 2nd, which marks Tariff Liberation Day, yet we view current market action as a repeat of the setup from 2018 during the first wave of tariffs under Trump’s administration.

• In 2018, equities bottomed on February 19th after a sharp 12% drop that was triggered by President Trump’s comments on tariffs at Davos on January 26th.
  – Despite ongoing volatility, the S&P 500 established support above the 200-day moving average, successfully testing that level three times.
  – Importantly, the VIX spiked to 50 on February 18th, coinciding with the market bottom.
  – A secondary VIX peak of 26 occurred on April 2nd when tariffs were enacted, but fear had already receded.
• Sentiment measures further supported the idea that markets found footing before the crowd caught on:
  – The AAII Bull-Bear spread showed investors remained bullish until mid-April—well after the February bottom.
  – Similarly, the University of Michigan’s two-month change in equity sentiment reached a low on March 31st, confirming that pessimism lagged the market turn.
• Fast-forward to 2025, and a similar pattern appears to be unfolding.
  – The S&P 500 is seeing support around the 200-day moving average once again.
  – The VIX peaked at 28 on March 10th, and sentiment deterioration has been far swifter this time.
  – AAII bulls have plunged to -40 in just three weeks, versus a three-month decline in 2018.
  – Moreover, the Conference Board’s stock sentiment flagged a two-month drop of -17 in March, reinforcing that sentiment has already reset.
• If the 2018 comparison holds, equities could be poised for sustained upside.
  – In that earlier cycle, once the cluster of fear and bearish sentiment formed, stocks advanced 15% over the next several months.
  – We believe that we are now in that same setup, with the current rally supported by negative sentiment and technical resilience.
  – This may evolve into a V-shaped recovery—a “face ripper”—especially after April 2nd.
• Broader global performance and policy expectations further bolster the bull case.
  – International equity markets are outperforming U.S. stocks, possibly signaling optimism around tariff negotiations or global reflation.
  – Meanwhile, the prospect of 2025 tax cuts echoes the pro-growth environment of 2017, adding fuel to the risk-on narrative.
  – Keep in mind that there is $850 billion in incremental cash still on the sidelines and margin debt continues to contract, both of which serve as tailwinds for equities.
• TSLA remains emblematic of broader policy dynamics and equity upside.
  – The stock has faced pressure amid calls for Elon Musk to return his focus to the company. We characterize this as a “White House put,” arguing that political interests may align with a rebound in Tesla.
  – If TSLA reclaims the $330 level, it could retest all-time highs.
• Tomorrow brings important macro data, including Core PCE and the University of Michigan inflation expectations.
  – Consensus is currently at 0.31% for Core PCE, but even a modestly hot print would leave the year-over-year inflation rate under 3%. 

Bottom Line: Stay on target.

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45 SMID Granny Shot Ideas: We performed our quarterly rebalance on 2/18. Full stock list here -> Click here

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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 Tame
• 3/24 9:45 AM ET: Mar P S&P Global Manufacturing PMI Tame
• 3/24 9:45 AM ET: Mar P S&P Global Services PMI Tame
• 3/25 9:00 AM ET: Jan S&P CoreLogic CS home price Tame
• 3/25 10:00 AM ET: Mar Conference Board Consumer Confidence Tame
• 3/25 10:00 AM ET: Feb New Home Sales Tame
• 3/26 10:00 AM ET: Feb p Durable Goods Orders Tame
• 3/27 8:30 AM ET: 4Q T GDP Tame
• 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: