Black Monday?

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POLITICAL LANDSCAPE SHIFTS AND MARKET TREMORS

The markets have been absolutely rocked this week, and I've been watching the fallout with intense interest whilst on annual leave on the beach with a mojito, so I’ll keep this week’s newsletter to the point. As I sit here analyzing the charts, one thing is abundantly clear: we're witnessing a seismic shift in the global economic landscape that will create both tremendous risks and extraordinary opportunities for those who can read the signals correctly.

Trump's sweeping tariffs have sent shockwaves through global markets, creating the most aggressive trade shock we've seen in decades. The 10% baseline tariff on most imports to the US, coupled with a punishing 25% tariff on all foreign cars, has triggered a chain reaction that's reverberating through every market sector. This isn't just another policy announcement – it's a fundamental restructuring of global trade relationships that will have lasting consequences.

I've been positioning my portfolio defensively for weeks in anticipation of increased volatility, and that strategy has paid off handsomely. The VIX – our fear gauge – has exploded nearly 80% higher over the last 8 days to 32.7 on YLDFX Futures, approaching its 52-week high. This level of fear hasn't been seen since the COVID crash, and it tells me that institutional money is scrambling to hedge downside risk.

Let me be clear: this volatility creates tremendous opportunity for those who maintain discipline and strategic focus. While the masses panic, I'm identifying specific sectors and assets that will not only weather this storm but potentially thrive in the new economic reality being shaped by these political decisions.

UK AND US MARKETS: DAMAGE ASSESSMENT

The carnage in equity markets has been substantial. The FTSE 100 suffered its worst day since the COVID pandemic, plummeting 4.95% in a single session. Defence giant Rolls-Royce saw losses exceeding 10%, while miners and banks were hammered with 8%+ declines. This isn't just a correction – it's a repricing of risk across the entire market.

Looking at the data, the FTSE is trading below 8,000, well off its recent highs, while the more domestically-focused FTSE 250 settled at 18,365.35. The selling pressure has been relentless, but I'm seeing potential value emerging in select UK companies with limited US exposure and strong balance sheets.

Across the Atlantic, the damage has been equally severe. The S&P 500 dropped over 4% to 5,074.08, while the tech-heavy NASDAQ plunged more than 5% to 15,587.79. The Dow Jones Industrial Average wasn't spared, falling to 38,314.86. Approximately £1.5 trillion was wiped from US stocks in a matter of days – the kind of wealth destruction that creates both panic and opportunity.

What's particularly interesting is China's response – a 34% retaliatory tariff on US goods and new export controls on rare earth elements. This escalation signals that we're entering a prolonged period of trade tensions that will reshape global supply chains and create new winners and losers across industries.

VIX, GOLD, AND OIL: FOLLOWING THE SMART MONEY

I always pay close attention to what the smart money is doing during times of market stress, and the signals are crystal clear. The VIX has exploded higher, gold is lifting, and oil is plummeting – the classic trifecta of a risk-off environment.

The VIX's surge to 32.7 reflects extreme uncertainty and fear. Historically, such elevated levels have preceded significant market dislocations, but they've also created excellent entry points for strategic investors. I'm watching for signs of stabilisation, which could present tactical opportunities in oversold sectors.

Gold has performed exactly as expected during this turmoil, rising 4.78% to $3,056.10 and approaching its 52-week high. This confirms its status as the premier safe-haven asset during periods of market stress and currency uncertainty. I've been increasing my allocation to gold for months, and as discussed in my weekly lessons, we anticipate further upside. Want to join my live weekly trading group? Join here.

Meanwhile, oil has dropped significantly to $62.32, a 6.09% decline that reflects growing concerns about global economic slowdown. The vast trading range indicates high volatility, with traders reassessing demand projections in light of potential trade wars. This bearish sentiment could persist if trade tensions continue to escalate, potentially pushing prices even lower in the near term. The correlation between these three metrics paints a clear picture: capital is flowing from risk assets to safe havens in anticipation of economic turbulence. This is precisely the environment where fortunes can be made or lost based on strategic positioning.

WHERE THE OPPORTUNITIES LIE THIS COMING WEEK

Based on my analysis of current market conditions and political developments, I see several compelling opportunities emerging in the week ahead:

1. Gold and Precious Metals

Gold's surge amid market uncertainty demonstrates its enduring value as a safe haven. The last two day outflow to the JPY (Yen) allows for pullback buying opportunities. For those equity traders, I'm particularly interested in physical gold ETFs like GLD and IAU, which provide direct exposure to gold price movements. For those seeking leveraged exposure, select mining companies with strong balance sheets offer attractive risk-reward profiles. I'm also watching silver and platinum, which tend to follow gold's trajectory with higher volatility. If this risk-off environment persists, these metals could potentially offer even greater upside.

2. Defensive UK Equities

The FTSE's dramatic fall has created value opportunities in fundamentally sound UK companies. I'm focusing on export-oriented firms with limited US exposure that won't be severely impacted by tariffs. Companies with a strong presence in markets outside the US- China trade dispute look particularly attractive.

UK utilities and consumer staples with primarily domestic revenue streams offer defensive characteristics in this environment. I'm targeting companies with strong pricing power that can pass on potential import cost increases to protect margins.

3. US Selective Opportunities

Despite the broad market sell-off, I see selective opportunities in US companies with primarily domestic supply chains and customer bases. Businesses that may benefit from 'onshoring' manufacturing due to tariffs deserve close attention.

In the technology sector, despite the significant sell-off, companies providing essential services with limited international exposure offer compelling value. Cybersecurity firms remain attractive as digital threats persist regardless of economic conditions. Ill be covering some of these opportunities in my membership subscription newsletter.

4. Tactical Volatility Plays

With the VIX at extreme levels, volatility-based instruments present interesting short-term trading opportunities. I'm considering VIX put options as volatility typically reverts after extreme spikes. This strategy requires precise timing and risk management, but the potential returns are substantial for those who execute correctly.

5. Energy Sector Considerations

The drop in oil prices to $62.32 has created potential value in selective energy companies with low production costs. I'm looking at integrated majors with diversified operations and strong balance sheets that can weather prolonged price weakness.

Renewable energy companies may also benefit from long-term energy transition trends, regardless of near-term economic turbulence. This sector offers both defensive characteristics and growth potential.

RISK MANAGEMENT IS PARAMOUNT

Risk management must take precedence over return chasing in this environment of heightened volatility and uncertainty. I'm implementing several key strategies to protect capital while positioning for opportunity:

1. Staggered Entry Strategy: Rather than deploying capital all at once, I'm using phased entry into markets with predetermined entry points at various levels. This approach reduces timing risk and allows for cost averaging during volatile periods.

2. Hedging Strategies: Portfolio hedges through put options on major indices provide downside protection without sacrificing upside potential. I'm also exploring low-correlation assets to diversify risk exposure.

3. Cash Reserves: Maintaining higher cash reserves than usual provides both protection and the ability to capitalise on further market declines. Patience is a competitive advantage in turbulent markets.

CONCLUSION: NAVIGATING THE STORM

The coming week will likely bring continued volatility as markets digest the implications of Trump's tariffs and potential retaliatory measures from trading partners. Central bank responses and economic data releases will be crucial to monitor for signs of stabilisation or further deterioration.

For disciplined investors, this environment of fear and uncertainty creates rare opportunities to acquire quality assets at discounted prices. While the masses panic, I'm methodically building positions in select companies and sectors that stand to benefit from the changing economic landscape.

Remember, it's not about timing the market perfectly – it's about recognizing value when others are blinded by fear. The greatest fortunes are made during periods of maximum uncertainty by those with the courage to act when others are paralyzed.

Stay disciplined, manage risk carefully, and be prepared to act decisively when opportunities present themselves. The rewards for those who navigate this storm successfully will be substantial.

Until next week,

Samuel Leach