💰 5 Fact Friday: Yields Gone Wild + The $4T Fakeout

MARKETS
1. A Week Of Record-Setting Whiplash 🎢

If your portfolio needs Dramamine, you’re not alone.

This week delivered record-breaking swings, a firehose of headlines, and enough political chaos to rattle even the most seasoned investors.

Here’s a quick recap:

Monday: The Slide

• Trump threatens an extra 50% tariff on China in response to their retaliation last week.

• Circuit breakers trip across Japan, China, Singapore, Australia, and more as global markets tank.

• Rumor of a 90-day pause sparks a $4T intraday rebound in the stock market, which quickly reversed when the White House calls it “fake news.”

• The Dow notches its largest intraday swing ever.

• The 10-year Treasury yield rockets to 4.26%, up from 3.86% last Thursday, raising fears of foreign bond dumping.

Tuesday: The Panic

• A +4% relief rally fades fast as the White House confirms the 50% tariff hike on China, bringing the total to 104%.

• Beijing retaliates with its own 50% hike, raising tariffs to 84%.

• The S&P 500 loses $2.3T in market cap, closing below 5,000.

• The VIX spikes above 50—a top 1% fear level historically.

• The 10Y yield rises further to 4.40%, marking the biggest 3-day jump since 2001.

Wednesday: The Bounce

• At 9:37 am, Trump posts: “THIS IS A GREAT TIME TO BUY!!! DJT.”

• At 1:18 pm, Trump announces 125% tariffs on China and a 90-day pause at 10% for other nations with higher “reciprocal” tariffs.

• Markets go berserk:

  • S&P 500 surges 9.5%—adding $4.3T in market cap

  • Nasdaq spikes 12.2%—its best day since 2001

  • Dow jumps 7.9%—its biggest point gain ever

Thursday: The Hangover

• The White House clarifies that China tariffs are actually 145%.

• Stocks give back part of Wednesday’s gains:

  • S&P drops 3.5%, Nasdaq falls 4.3%, Dow loses 2.5%

• Yields hold steady at 4.45%, settling—for now—below Inauguration Day levels but above where they stood pre-Liberation.

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MARKETS
2. The BTFD Reflex Kicks In Again 🛒

While institutions were panic-dumping everything but their coffee machines, one group went full send: retail investors.

Last Thursday, individuals poured $4.7 billion into the market—the biggest single-day buying spree in a decade, per J.P. Morgan. It’s all part of what one dismissive strategist called the Pavlovian BTFD (Buy The F… Dip) response.

Despite a market drop worse than Lehman’s 2008 fallout, retail buyers stepped in aggressively as prices bottomed following the Liberation Day announcement.

It was a sharp contrast to the 2020 COVID crash, when retail mostly followed institutional flows and picked ETFs over individual stocks. This time, Nvidia, Amazon, and other bruised favorites saw heavy inflows from dip-hungry traders.

Let’s not sugarcoat it: that $4.7B wasn’t nearly enough to offset the institutional retreat. But there’s plenty of firepower left. Cash on the sidelines has hit $7.4 trillion, and retail portfolios now hold 18.3% cash—the highest since 2020.

Plus, so far, the reflexive buying is holding up. Over the past week, Nvidia and Amazon are up 5.7% and 1.6%, respectively. Meanwhile, the S&P 500, Nasdaq, and Dow have fallen 2.4%, 1.0%, and 2.3%.

What excites retail? The belief that tariffs can vanish as quickly as they appeared. In some ways, this is a serious correction with an unusually obvious offramp.

What scares institutions? Lower P/E ratios don’t mean stocks are cheap, especially if the “E” (earnings) still needs to fall. If tariffs stick, expect downward revisions and further pain.

As Warren Buffett said:

We’ll see who holds on longer.

BONDS
3. Yields Gone Wild 📈

Boring ol’ Treasury bonds don’t usually make headlines. But this week, they broke character in a big way.

The 10-year Treasury yield spiked 53 basis points in just 3 days—the biggest jump since 2001. The 30-year blew past 5%, marking its fastest rise since 1982. For something that’s supposed to be a “safe haven,” this is... unsettling.

Quick refresher: bond prices and yields move in opposite directions. That’s because a bond’s interest payment is fixed. The less you pay for a bond, the better return (yield) you get. The more you pay, the worse the yield.

So when yields suddenly spike, it means bonds are being sold off—fast.

Why the sudden exodus? A few theories:

• Hedge funds are unwinding the “basis trade,” a heavily leveraged strategy that broke down when bond prices moved too quickly

• China may be dumping Treasurys

• Tariffs are stoking inflation fears, making bonds less attractive

• Investors could simply be raising cash, a move last seen during the 2020 COVID crash when traders sold everything to stay liquid

Whatever the reason, it’s a red flag. Treasuries are the financial equivalent of hiding under your bed. When they’re selling off? The whole house might be shaking.

It’s worth noting that Trump pulled back on tariffs right as yields spiked. Coincidence? Maybe. It’s impossible to know how much was premeditated.

But perhaps the administration was fine with equity market chaos... until the bond market started flashing warning lights.

After all, the U.S. needs to refinance $9 trillion in maturing debt this year. If buyers demand higher yields, that means higher borrowing costs for Uncle Sam.

Keep an eye on this bond drama—it may be more consequential than you’d think.

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The tech giant is doubling down on the smart home, the $158B industry that’s growing 23% annually.

And with Apple’s entry, investors are looking for the next breakout company - and potential acquisition target.

They’re chasing Google (acquired Nest, $3.2B) and Amazon (acquired Ring, $1.2B).

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GOVERNMENT
4. Social (In)Security Needs A Lifeline 🚨

Let’s talk about the elephant in the retirement room: Social Security.

Roughly 70 million Americans collect a monthly check, and for 1 in 4 retirees, it’s their primary source of income. So when headlines talk about “cuts,” people panic—and honestly? Fair enough.

Here’s the truth: Social Security doesn’t take your money, invest it, and then return it to you. Instead, it taxes today’s workers and hands that cash to today’s retirees.

It’s a pay-as-you-go system—and as long as people are working and paying payroll taxes, the money keeps flowing.

But lately... the math isn’t mathing. Since 2021, Social Security has paid out more than it collects. And by 2035, its trust fund could run dry. At that point, the system would only be able to cover 83% of scheduled benefits—a 17% cut across the board.

Deep breaths, though. That scary number doesn’t mean your check—or your grandma’s check—is vanishing.

Trump has repeatedly promised not to touch Social Security or Medicare. “We will not cut Social Security, Medicare, or Medicaid benefits,” he declared in his Liberation Day speech.

Democrats agree. Cutting retiree benefits is a political third rail—touch it and lose the next election. After all, retirees still make up the biggest cohort of actual voters.

Even Elon Musk isn’t suggesting cuts. His focus is fraud and waste, “so that it remains solvent and protects the social security checks of honest Americans!”

Still, the system needs a fix. Lawmakers could:

• Raise the taxable income cap (currently $176,100)

• Bump up the retirement age again

• Or trim future benefits for younger workers

Sound familiar? In 1983, Congress solved a funding shortfall with the same playbook:

• Raised the retirement age from 65 to 67 (only for those 45 and younger)

• Increased payroll taxes for both employees and employers

• Began taxing benefits for higher-income retirees

Now, today’s funding gap is even larger than 1983’s.

But most experts expect a similar strategy this time around: slow, gradual changes that spare those near or in retirement.

Shoutout to my fellow millennials—looks like we’ll be carrying the team on this one!

STOCKS
5. Guess That Stock 🕵️‍♂️

This week’s mystery stock is riding the AI boom—and its CEO isn’t afraid of tariffs, buybacks, or a ticker that doesn’t quite match.

Can you name it?

1. The company just launched a $10 billion buyback plan after tumbling 26% YTD, holding the line amid market chaos.

2. CEO Hock Tan is so proud of his Avago roots that he kept the $AVGO ( ▼ 2.07% ) ticker, even after merging with a more recognizable brand.

3. This chipmaker powers hyperscalers like Amazon, Microsoft, and Google—and wrapped up a $69B acquisition of VMware in late 2023.

4. With over 20% of 2024 revenue coming from China, there’s some exposure risk. Semiconductors are exempt (for now) from Trump’s 145% tariffs—but he says they’re coming “very soon.”

5. AI sales surged 220% last year, briefly pushing the firm past a $1 trillion market cap before the recent correction.

Got a guess? Tap here to reveal the answer → 

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