What to Do Now That the Market’s Bounced
Making a few portfolio changes today...
Are we in a V-bottom recovery?
That’s the question every portfolio manager is trying to answer right now.
Since the Liberation Day crash, the S&P 500 has staged a dramatic comeback—reclaiming every point it lost and then some. Lucky for us, we were aggressive buyers during that selloff (you can see our buys from that week here, here, and here) as we deployed more cash than at any point since the COVID-19 crash in March 2020.
But I’m still holding 10% of the portfolio in cash. Why? Because cash is like a call option with no expiration—an option on every asset class with no strike price.
And where we deploy that cash next depends on one thing: what kind of recovery is this?
Here's What the Data's Telling Me
Stocks typically bottom in two ways: either as a sharp V-bottom like in 2020 or a slower, rounding bottom like in 2022. And from where I’m sitting, it looks like we’re in the early stages of a V-bottom.
We’re not in a housing crisis. We’re not facing a global financial meltdown. And we’re definitely not back in March 2020. What we’re dealing with now is a self-inflicted slowdown, caused largely by political uncertainty—namely tariffs and trade volatility. That’s a different beast.
So far, this doesn't look like a “credit event” like 2008 or a black swan pandemic like 2020. It’s a new regime: one defined by volatility, political risk, and lower valuations—but not disaster. If this is April 2020 or October 2022, the worst is already behind us. If it’s May 2008? We’ll find out quickly if the cracks under the surface widen—and we’ll reposition accordingly.
But for now, the data favors a V-bottom. The percentage of NYSE stocks trading above their 200-day moving average recently hit 15%—a historic oversold level that has never marked the beginning of a major bear market. In fact, each time this happened (2020, 2022, and now), it marked the end of a drawdown. The VIX spiking above 50 has also been a reliable market bottom signal for decades:
We’ve now retraced over 50% of the 2025 near-bear market. And here’s the key stat: in every single instance in history where that’s happened—16 out of 16 times—the market was higher one year later. No exceptions.
That doesn’t guarantee the lows are in. But when you stack that on top of everything else? It makes a compelling case.
Here's What I'm Buying on a Likely Pullback
Now, that doesn’t mean it’ll be a straight line higher. As Paul Tudor Jones said this morning, right now we have a combination of a stubborn Trump raising taxes (i.e. Liberation Day tariffs) at their fastest rate since the 1960s and a Federal Reserve unwilling to cut rates.
That's a recipe for lower stocks - and at least sideways - in the near-term. But once the recessionary data starts to roll in, I expect both Trump and the Fed to cave. That will be the recipe for new all-time highs.
In the near-term, the S&P 500 bounced off the 200-day MA yesterday after a 21% rally off the lows. That's a massive move in just a few weeks. Much like a rubber band getting stretched in one direction, won’t take much—a scary headline about China, mixed messages on tariffs—to spark some snapback short-term profit-taking.
And frankly? Even a deal on tariffs might end up being a “sell the news” event. A lot of optimism is already priced in. Maybe that’s justified. Maybe everything will be fine. But when everyone starts agreeing on the same outcome, I start getting cautious.
The time to get aggressive was during the VIX spike in early April, which is exactly what we did. We no longer have the "green light" to get hyper aggressive again here, but I imagine we will get another shot in coming weeks.
So, while we're going to add to a few positions today, do not let your guard down yet.