Trading in a Bear Market

Apr 18
6 min read

Updated: May 12

Friday, 18th of April

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What Moved The Market This Week

A lot has happened this week, with the decisions of the Trump administration overshadowing everything else. The erratic tariff policies continue to contribute to market uncertainty, and conditions remain fragile.

There was some relief after smartphones, computers, semiconductors, and consumer electronics were excluded from the 145% China tariffs. Still, Commerce Secretary Lutnick stressed on Sunday that this pause would last only one to two months. Donald Trump posted before markets opened that no one was “off the hook.”

Apple shares reacted positively. However, both Citigroup and J.P. Morgan have lowered their price targets and expect weaker demand for the iPhone and much of Apple's hardware segment.

Citigroup has downgraded U.S. equities to "Neutral" going into the new week.

Weak order books are weighing on the tech sector. NVIDIA came under pressure this week after new export restrictions were imposed on H20 GPUs to China and several other countries. As a result, NVIDIA is taking a one-time write-down of $5.5 billion. AMD must now also obtain approval before selling certain chips to China.

Numerous analysts have lowered their earnings targets for NVIDIA. According to Citigroup, the July quarter is unlikely to beat Wall Street estimates by the usual margin. China accounts for about 10% of NVIDIA’s data center revenue. Evercore ISI expects earnings estimates for NVIDIA to fall over the next 12 months.

Bank of America has also lowered its price target for Marvell Technology from $120 to just $72. The entire sector could face revenue losses of 4% to 6% under moderate tariffs. In a scenario of aggressive tariffs, losses could reach 12% to 13% this year and into 2026.

Thanks to strong figures from Taiwan Semiconductor, we may see a rebound in AI and chip stocks.

While the S&P 500 and Nasdaq attempted to bounce back, the Dow Jones Industrial Average was dragged down by a nearly 20% plunge in UnitedHealth shares. The health insurance giant cut its outlook.

Eli Lilly shares surged, driven by results from the third clinical trial phase for its weight-loss pill aimed at treating type 2 diabetes and obesity.

China Halts Boeing Deliveries Amid Escalating Trade Tensions

China has reportedly ordered its airlines to suspend acceptance of new aircraft from Boeing, in response to the recently imposed 125% tariff on U.S.-made planes and components. This move is widely viewed as a direct retaliation to American tariffs targeting Chinese goods.

Impact on Boeing:

Boeing shares fell 3% on the news and are now down 12% year-to-date.
China represents a critical long-term growth market, expected to drive 20% of global aircraft demand over the next two decades.
Boeing currently holds 130 outstanding aircraft orders from Chinese airlines — including 96 units of the 737 MAX, a key commercial model.

What It Means:

This latest development poses a significant risk to Boeing’s future revenue and international market share. It could further tilt the balance in favour of Airbus, which may gain a stronger foothold in the Chinese market. Investors will be watching closely for Boeing’s response and whether diplomatic efforts can ease tensions.

Gold Hits New All-Time High — What’s Driving the Surge?

Gold has surged to a new all-time high, driven by a perfect storm of geopolitical uncertainty, central bank buying, and rising concerns over global trade tensions.

The rally follows hawkish signals from the U.S. Federal Reserve and growing speculation about renewed tariffs under a potential second Trump administration — both of which have sent investors flocking to traditional safe havens.

Citi Raises Price Target:

While some short-term profit-taking has begun, Citi analysts have raised their 3-month gold target to $3,500 per ounce, citing strong momentum and elevated demand.

Gold continues to shine as a defensive play in uncertain times, offering a hedge against inflation, currency volatility, and global policy risk.

Something Fundamental: Bear Market and Outlook

One must be especially disciplined when buying or selling during bear markets. During the 2022 bear market, we saw five drawdown phases of 9% to 17% and four bear market rallies ranging from 5% to 16% before the bottom was reached. We will continue to see sharp rallies, often triggered by oversold markets. But that doesn’t necessarily mean the bear market is over. Believing so, can be costly.

What’s Worrying

According to Goldman Sachs, traders on Wall Street established short positions in S&P 500 futures worth $40.4 billion between April 1 and 8. That’s the largest weekly increase since COVID. The panic that followed the tariff postponement headlines triggered massive short-covering. Billions were made and lost.

The fragility of the situation is reflected in rising stress within the U.S. Treasury market. The yield on 10-year bonds jumped nearly 50 basis points last week to 4.48%. The stock market is no longer in control. A weakening U.S. dollar combined with rising yields is putting pressure on the S&P 500.

Foreign investors currently hold:

33% of outstanding U.S. government bonds (worth $8.5 trillion)
27% of U.S. corporate bonds ($6.5 trillion)
19% of U.S. equities ($16.5 trillion)

The growing buyer strike in U.S. capital markets is putting pressure on several asset classes. Capital is flowing out of the U.S. rapidly.

At What Levels Is a Recession Priced In?

According to Bank of America, a recession is priced into the S&P 500 at the 4,800-point level. At the top of the table, we can see the earnings expectations for index constituents. While Wall Street started the year targeting around $275 per share, estimates for the next 12 months have dropped to the $245–255 range. The table helps determine where the S&P 500 should trade based on earnings and valuation.

Recession Remains Likely

The true economic impact of the tariffs will take time to manifest, possibly months. What we can already assess is what’s priced in and what the recent market pullback is signalling. The results are sobering.

In 9 of the last 13 times the S&P 500 fell 20% from its peak (dating back to 1929), the U.S. economy entered a recession. In the past 30 years, earnings growth (EPS) turned negative after three of the last four 20% drops in the index — the exception being 2022, when earnings merely stagnated. In all four cases, actual earnings ended up at least 10% below consensus estimates at the time of the selloff.

An average of these four “earnings recessions” suggests that earnings could fall 25% below current expectations — pushing S&P 500 EPS to around $207 next year. That would be a 15% drop in earnings year-over-year — a sharp decline, but not historically unusual. Once earnings growth turns negative, profits often decline further.

In other words: Capital preservation remains absolutely essential.

What's Coming Up Next Week

As earnings season heats up, investors will be focused on a combination of corporate results, central bank decisions, and key economic data. All of which could set the tone for near-term market direction.

Earnings in Focus

A string of heavyweight earnings reports will offer fresh insight into the health of the economy:

Tuesday, April 23

Johnson & Johnson (JNJ)
Bank of America (BAC)
Citigroup (C)
United Airlines (UAL)

Wednesday, April 24

Abbott Laboratories (ABT)
ASML Holding (ASML)
U.S. Bancorp (USB)
Travelers (TRV)
Prologis (PLD)

Thursday, April 25

UnitedHealth Group (UNH)
Taiwan Semiconductor (TSMC)
American Express (AXP)
Netflix (NFLX)

Expect volatility across tech, financials, and healthcare, especially with key results from ASML and TSMC likely to impact tech-heavy indices.

Global Central Banks

While the Fed is on pause, both the European Central Bank (ECB) and the Bank of Canada (BoC) will hold rate meetings next week. Market consensus is leaning toward 25-basis-point cuts from both, driven by moderating inflation and slowing growth. These decisions could ripple through currency and equity markets worldwide.

U.S. Economic Data to Watch

Retail Sales (March) – A key gauge of consumer spending strength
Consumer Sentiment (University of Michigan) – Insights into household expectations
Initial Jobless Claims – Still a key indicator of labour market dynamics

Takeaway

Markets next week will likely be driven by earnings headlines and macro data. Strong corporate results and dovish central bank signals could support risk appetite, but rising yields and weak consumer indicators may weigh on sentiment.

Disclaimer: This content is for informational and educational purposes only and does not constitute financial advice. It does not consider your personal objectives, financial situation, or needs. You should consider whether the information is appropriate for your circumstances and seek professional advice before making any investment decisions. Investing in stocks carries inherent risks, and the application of any strategy may not eliminate the risk of loss. Market conditions, volatility, and unforeseen events can impact outcomes, and past performance is not indicative of future results.