'Fast Money' traders talk what to expect in next 100 days

Key Concepts

• S&P 500 valuation
• Earnings season and guidance
• Stagflation scenario
• Growth scare vs. recession fears
• Policy detox phase
• Deregulation and tax cuts
• Animal spirits
• Tariffs and trade uncertainty
• VIX (Volatility Index)
• 10-year Treasury yield
• US Dollar Index (DXY)
• Bilateral agreements

S&P 500 Performance and Valuation

• The S&P 500 is down approximately 9% from its all-time high, which is considered a "win" given the current economic backdrop.
• The key question is whether earnings will be as robust as the market expects. There's concern that the market is still a little expensive.
• Many companies are suspending or not providing guidance (e.g., UPS, GM), making market valuation difficult.

Economic Scenario and Market Outlook

• A "stagflation scenario" was modeled with inflation in the mid-3% range and GDP at 0.5% for the year.
• This scenario suggests a reasonable year-end S&P 500 level of 5351.
• The market has held within a 20% drawdown range, indicating a "growth scare" rather than a recession. A recession would imply a further market drop.
• The expectation is for less volatility in the next 100 days, despite ongoing uncertainty.

Policy Detox Phase and Future Catalysts

• The "policy detox phase" refers to the initial period of disruptive policy changes from the administration.
• The expectation is that the administration will shift towards deregulation and tax cuts, potentially eliciting "animal spirits" in the markets.
• Significant economic issues remain due to tariffs and trade uncertainty.
• The administration may be moving towards deal-making, which could provide market catalysts.

Contrarian View on the Next 100 Days

• A contrasting view suggests the next 100 days could be "far worse" than the initial period.
• The dismantling of existing infrastructure and the appointment of individuals to dismantle organizations are cited as concerns.
• Uncertainty around trade and tariffs is expected to persist.
• Companies' guidance is considered a crucial indicator, particularly the outlook for the back half of the year.
• The 10-year Treasury yield and the US Dollar Index (DXY) are considered key indicators for equity performance.
• Skepticism is expressed regarding the likelihood of securing bilateral agreements, citing difficulties even with allies like Canada.

Key Indicators and Market Signals

• VIX (Volatility Index): As long as the VIX remains in the mid-20s or even drops to the low 20s, the "pain trade" (market direction that hurts the most participants) remains higher.
• 10-year Treasury yield: Considered a key indicator for equity performance. Currently at 4.17.
• US Dollar Index (DXY): Also considered a key indicator for equity performance. Currently at 99.
• Earnings Guidance: The outlook provided by companies during earnings season is crucial for assessing the market's future direction.

Conclusion

The discussion revolves around the current state of the market, its valuation, and the potential impact of economic factors and government policies. While one perspective suggests a period of relative stability and potential upside driven by deregulation and tax cuts, another view expresses concern about persistent uncertainty, the dismantling of existing structures, and the difficulty in securing trade agreements. Key indicators like the VIX, 10-year Treasury yield, and the US Dollar Index, along with company earnings guidance, are highlighted as crucial signals to monitor for future market movements. The contrasting viewpoints underscore the complexity and uncertainty surrounding the market outlook.