The eye of the storm? How the pros are positioning with US stocks set to rebound

Such are the vicissitudes of markets that last week’s chaos already seems a relic of the past.

Trump’s climbdown on global tariffs saw stock markets enjoy one of their best days in history, with more green expected this week.

After the dust finally settled, last week ended with the ASX 200 down only 0.28% and the S&P 500 up 8.27%, with both indices now coming out of correction territory. 

US big tech, which bore much of the brunt of the tariff news, also bounced back in impressive fashion. 

Nvidia (NYSE: NVDA) was up 26.69% last week, Amazon (NYSE: AMZN) up 14.12% and Apple (NASDAQ: AAPL) up 11.82%.

All were likely to continue rising this week after Trump granted a tariff exemption for smartphones and laptops late on Friday.

But this might change following comments from US commerce secretary Howard Lutnick on Monday signalling new tech tariffs were coming.

Charlie Aitken, investment director at Regal, wrote in a note to clients that he expected US equities to be up 5-7% on Monday’s market open, with even bigger moves on the leading tech stocks now that people like Tim Cook, Jamie Dimon and Bill Ackman seemingly have the ear of Trump.

He summed up the changing sentiment succinctly - “the adults are in the room... BUY.”

But despite the newfound bullishness, things remain in a precarious state, with the 90-day pause unlikely to be the last twist in the tariff tale and significant economic headwinds still forecast.

So, before you hit the 'buy' button, here's what the experts are saying on US markets. 

Is it full steam ahead?

Aitken sees the recent crash and subsequent bounce as simply flushing out the large amounts of leverage that had built up in markets recently.

"I remain of the view that all we have witnessed was one giant hedge fund margin call that now paves the way for the recovery. Now is the time to play offence." - Charlie Aitken

After his recent tariff backdown, Aitken believes Trump will also need to do the same on the remaining China tariffs, given his supporter base shops predominantly at US stores that source many of their products from China.

“I also remain of the view that Trump, for all his bluster, is holding a very weak hand. Not only did he blink when the US equity markets fell sharply and US treasury yields rose, his next blink will be concessions for US retailers," said Aitken.

So what happens next?

“Non-negative news flow, and light net and gross hedge fund positioning, is a very BULLISH combination,” says Aitken.

Lachlan Hughes, founder and CIO of Swell Asset Management, strikes a more sober tone.

“We adopted a defensive posture ahead of Liberation Day as we were concerned about the unintended consequences of the tariffs,” he told Livewire.

“During the March quarter we significantly reduced the number of companies in the portfolio and increased our cash weighting to 18%. These fears remain today despite the market searching for hope amid the chaos.”

While short-term sentiment may have improved, the roaming circus of US politics rolls on and with it comes even more uncertainty. 

"We have formed the view that the US administration has clear water for about six months before they will need to consider courting voters in the US mid-term elections in November next year," said Hughes. 

Warren Buffett says the question you need to ask in economics is, “and then what?” And we believe the market is underestimating second and third order impacts.

But Swell's investing philosophy hasn't changed, even if this latest chapter raises serious questions about America's global standing.

"The tide is running out on US exceptionalism, however our focus is unchanged as we seek to own the world's best companies. For better or worse, those companies remain in the US." - Lachlan Hughes

In a note to clients, J.P. Morgan's head of global equity strategy, Mislav Matejka was even more bearish. 

"Even in light of the latest 90-day tariffs pause for non-retaliating countries and the electronics exemptions, given that SPX is now only 5% below the levels held on 2nd April, we struggle to see equities trading sustainably above the pre-"Liberation Day" levels," said Matejka.

"[The tariff situation] is an already much worse backdrop than most expected at the start of the year, and relative to this, main global equity indices are down only single digits on the year."

Going for gold

According to Aitken, gold still remains a promising play despite its strong performance in recent years.

“Multiple market sources cite that Beijing is actively selling down its holdings of US Treasuries and buying gold. This in turn is weakening the US Dollar,” he said. 

Not only does gold retain its status as a store of value hedge, it could even take market share away from USD in global reserve allocations.

“The US Dollar’s share of international reserves is going to continue to fall. This is so bullish for gold, and in turn, gold equities.”

“I am personally of the view that gold and gold equities are entering a structural bull market.” - Charlie Aitken