Okna trillions.
I'm Joel Webber and I'm Eric belchernis Well, Eric, we live in exciting times.
I think we've recorded a couple versions of this episode, and here we are after the market's closed on Wednesday, April ninth. What has happened?
I guess the Trump put is real. That's what we found out today. So the Trump Put was this idea that somewhere along the lines of these tariffs there was going to be a point where.
The president would back off.
A little because he wants to see the stock market do well, and he wouldn't let the whole stock market go into the doghouse.
And people thought, well, maybe he will.
This is a new Trump, it's not the old one, and people were kind of digging in, and even I was. I had said early on, I just don't think he'll let it get this far. I was wrong, But then again I guess I was right eventually. But he came in said there's a pause on the tariffs, and it's complicated. They're not over, but just the word pause, and it came from his mouth. It wasn't fake news. The markets
went absolutely bananas. The algos which were lying in wait like salivating dogs were thrown big chunk of red meat and basically like the QQQ went up twelve percent today, Joel, that's the third best day ever, barely behind the second best day, which was in two thousand and eight during the Great Financial Crisis. And both of those are a bit behind January third, two thousand and one. So this is up there with those eras of those crazy times.
You know, there's two thousand and one, two thousand and eight, and now this is going to be historic and memorable for different reasons.
That's the kind of thing we just loved through.
So we have no guests for this episode. It's Eric and me talking about what just happened and trying to make sense of it and giving you some etf insights in the process, this time on Trillions. What just happened? Eric, welcome back to Trillions, see you and me.
Yeah, it's been you know, it's funny there somebody was pointing out the Goldman Sachs had basically predicted a recession at like noon and walked two hours later said, h recession is off. So we did the same thing except podcasts.
So it has been a turbulent week. We saw market go way down and and as you've u helped said in the intro, things have come back. What are some of the the stats that jump out at you, Well, just.
The inter day moves in some of these ETFs. You know, we just went over the ques. I think that is a massive number. Twelve percent. I mean that's one day now. It's still not back up, you know, to where it was before all this started, but it's went a long way towards that. And but one of the ETFs that stood out to me was SOXEL SOXL. This is the three X semiconductors ETF, which I remember looking at it all week and it just kept taking in tons of money and I was like, man, these degens are crazy.
This is like they were just throwing money into this thing was going down and down and down, and honestly, they're looking good today. It went up over fifty percent in one day. Fifty five percent, right, this is the best return it's ever had. It's like fifteen years old.
And my god.
So if you know, we had looked over the past couple of weeks and we were like, there's really only two people that seems like they're buying this market.
The Vanguardians. They always buy the market.
But the degens, they were really hanging tough, and I thought, how long can they tell?
How much can they take?
This is going to embolden them forever. I mean, they're never not going to buy the dip anymore. And this, I got to be honest, is why I have a hard time being anything other than a vanguardian investor myself personally, because market timing is so hard, especially in a world where the Fed or the President can control the market with like one word.
You know who? Who could have called this right?
All the evidence and data pointed to more pain and just reminds me of COVID a little. Remember when the FED stepped in to say they're buying bonds and the market did the same thing. This is why it is just as dangerous to go to cash sometimes, even if everything seems like it going to hell. I imagine this is just going to live with people for a while. If anything, it could make people better disciplined. They might just never mess with their portfolio again.
We why bother.
So some cracks were forming earlier in the week. Where were some of those cracks and are they still there or have they you know, been just kind of covered up? Up for the time being.
The cracks are gone, basically. So one of the stories that Bloomberg News wrote was about the COLO ETF and how it traded at a one percent discount.
And this was what's the ticket for this one?
Jaws Yeah, jaaa yeah.
So it's not a big discount. You know, we saw discounts up to twenty nine percent during COVID in some ETFs. But it was the first sign that there was maybe some illiquidity forming in bonds. And some people even said that the bond market was what pushed Trump to change. I don't know if that's true or not, but the bond market was starting to be.
He said as much too, like he has said that now.
Yeah, so to confirm then, So the bond market was starting to show some ill liquidity. Treasuries were doing what we didn't think they would do. They were going down even though the stocks were going down. That's a bad sign anyway. There was just the very hint of cracks or illiquidity forming in bonds, and a Jaw was one of the early ones to show that. But it were
really light. I mean we're talking like a swell way out yonder you know, not even close to being anything big yet, But these cracks are going to be gone. If anything, what we might see is the opposite role. Instead of seeing discounts, you could see some premiums because so much a wall of money just probably bought the market all day that the you know, arbitragers are just trying to keep up.
Probably you could see some premiums.
Okay, So what about flows? What how crazy did they look before? And what happened in the afternoon.
I gotta be honest.
I've always said ETF holders are more diamond hands than people give them credit for. But this year they really showed diamond hands. ETF took in three hundred and three billion through the year, and the last couple of weeks were really good. They were averaging like four or five billion a day. Mostly vous you know again, it was the vanguardians and the degens, and there were some people doing opportunistic buying like there were definitely a lot of
flows into cash like ETFs. But the equity ETFs did fine. They had their best quarter in Q one, and you know again, they're reaping the benefits today, at least for today. We'll see where it plays out from here, but they look good. I'd imagine we'll see another pickup and flows, you know, even another little boost. A lot of times you have the trading crowd and the retail crowd. The retail crowd had been buying the whole time. The traders
were kind of coming in and out. Normally they're just running for the hills during something like this, but they were kind of in and out. They weren't totally committed to being in or out. And the neutralness let the vanguard flows really power through.
So there's flows. What about volume volume?
It was fascinating.
I always bring up those two scientists in Silence of the Lambs troll who they brought the butterfly thing to the bugs. Those guys are the thick glasses who are like, oh, this is so interesting. This is what the last three days were like for us. The volume was crazy. On Monday, the spy tradered one hundred and twenty seven billion. That was the biggest day ever on record. A lot of times there's volume explosions in around a capitulation moment, so
we were wondering, okay, is this it now? We thought that even before the news, But the volume today was almost as much. And I think a lot of the volume today was buying volume. So I think we're going to see when you look at the month of April, it is going to blow away other month on record for ETFs, most likely at least this week. So a lot of people leaned on ETFs who are traders and everything you know, worked fine, but the volume showed a lot of fear and just craziness in the market.
And I know that Athanasios Sera Fegas on your team at Bloomberg Intelligence did a little study. What did he find in that study?
He looked at times where the spy volume is over sixty billion. You know, I've always called sixty billion. The freak out zone spy average is twenty five billion.
So anything beyond that.
Yeah, anything beyond sixty to me.
Here's why, because spy is used by so many people on the outskirts of their portfolio, almost like a liquidity sleeve. So if they're like especially bigger investors, if they want to tweak their investments for something bad, they might add a put option from their spy account, which would end up creating volume for spy, or they might just short spy, or they might buy extra spy.
The spy is where they move.
The knobs on the outside of their portfolio to get the system just right, because they don't want to mess with their picks in the middle. People like to keep the rest, you know, as it is. So spy is an adjustment mechanism. So when people are adjusting, the volume goes up. And he looked at those days over sixty billion and found that in the next month there's a two thirds chance that the market will be positive and the medium return was about one point two percent, so
not gangbusters, but positive. And so again this is because a lot of times there's these freakouts where spy volume goes up, VIX goes up, and it is in a way an explosion of negativity, almost like a real explosion, and then the dust kind of settles and people that start looking for some opportunity in the rubble. And I
think that's sort of what happened here. It's just that seemingly that rebound got sped up, you know, eight hundred times it was put condensed into about an hour instead of a month.
What are you, as an ETF vanalyist watching out for next?
Yeah, So one thing we're looking at David Cohne, who covers active funds.
Is how active managers dealt with this?
You know, did they go to conservative Well, we found but this is before the bounce back. We did find that active equity managers normally only beat the market, like only thirty three percent of them typically beat the market in any given year. Over half were beating the market in the past week. In other words, they had done they were tilted a little more towards value stocks and fundamental less mag seven, they were positioned pretty well. But
this rebound, how will this affect that? On the flip side, bond managers did very poorly. They are a benchmark against the AG, and the AAG is full of treasuries and a lot of them they take extra risk, so a lot of them when there's a huge sell off in bonds, they get caught a little naked, and so a very small.
Amount of them outperformed during the sell off.
The you know, when the tariff was the worst. They're probably happy because risk is back on. So it's interesting, how, you know, what are you supposed to do as an active manager? I mean, this is something we'll be exploring for the next couple of days. We felt that people had the same dilemma for the past two years. You're an active manager, these mag seven stocks are like extremely high valuations. What do you do do you do you underweight them and miss out on the next leg up,
or do you overweight them or neutral weight them. It's it's really hard right now to be an active manager, and especially on the macro side, because these macro winds can just decimate anything it had going. If anything, it probably bodes well to just be a classic stockpicker because these macrowinds come and go, but at the end of the day, over time, the good companies rise to the top.
Okay, last question, Eric Trump paused many tariffs, but he's holding firm on China. So what does the prospect look for world X China and ETFs.
That had been a very popular trade for a little while. And it's interesting since you know the TEARFF pause was announced, China had a good day. I kind of thought it would be a little worse for them. But right now, like if you look at.
Year to date returns, what's the ticket for this.
Emx C is Emerging markets X China and FXI is China. So EMXC was down nine percent year to date, FXI only down two percent, So China had been outperforming its emerging market peers, and if anything, this.
May reverse that a little.
Right, if China is sort of put into a special place and trade is full of friction with the US, it's possible that that goes the other way. So I would look for EMXC to maybe have a good couple days in lieu of you know, after this that said, what we found in China, and Rebecca and Jack on my team covered this is the national team bought ETFs
uh for the past couple of days. So just like the FED bought bond ETFs in twenty twenty, China's national team went in and bought equity ETFs and helped prop the market up.
So almost like they knew the Trump was coming.
I know, right, it was a it was a good bet. Well, let's say they are ostracized and they take a hit from like the trade of the US. Just it's hard to bet against a country where the government's going to.
Buy you know, ETFs or stocks.
I mean that's like again, don't fight the Fed, don't fight the Central Bank. So the China versus em is going to be tricky. There's I guess you could say there's reasons to do or don't boo, do both. But you know, I will say this, I think so many people are just very happy that it's paused. I think most investors really believe in the US. They wanted a reason to believe. They didn't want to think it was over a lot of investors here, I'll be honest. They
have a hard time buying European stocks. They have a hard time buying China, like they don't think China numbers are real. They think Europe isn't that motivated, the not much innovation. They'd rather have their money put to work here. So this past couple of weeks was just really painful for most average investors, and so I think most people are just so relieved.
What does the.
Future hold, I don't know, But what we do know now is that if the tariffs kick in, or if there's more tariff talk, we know they can be undone with literally one word. And I'd imagine this makes other assets. It makes it harder to attract assets because people know that at some point, you know, the president might capitulate if the market's that bad. So it's interesting spot we're in now. It does feel like the Trump played the role of the Fed in a way done Eric.
Always a pleasure, Always a pleasure.
Drop.
Thanks for listening to Trillions until next time. You can find us on the Bloomberg Terminal, Bloomberg dot com, Apple Podcasts, Spotify.
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I'm at Joel Webber Show. He's at Eric Valcunos. This episode of Trillions was produced by Magnus Hendrickson.
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