This Week

Friday brought some of the sharpest volatility across multiple asset classes since the initial tariff tantrum earlier this spring, setting the stage for a new week defined by a very different volatility regime — one where large index swings are back in play. This shift comes just ahead of the first major week of earnings season and against the backdrop of a continuing government shutdown that’s adding uncertainty ahead of the next FOMC meeting. That said, some reports over the weekend suggested the latest U.S.–China flare-up may have stemmed from a misunderstanding and could prove short-lived. Futures opened higher Sunday night, with S&P e-minis up about +1% in a modest relief bounce, though we’ll know more tomorrow on whether tensions truly just cooled. More on what’s ahead shortly, but first, a look at some of the weekend coverage.

• Stock futures rebound from Friday’s rout after Trump says China situation ‘will all be fine’ (CNBC)

  • Those moves come after Trump’s Truth Social post on Sunday suggested to investors the president may not follow through on his threat to post a “massive increase of tariffs” on China. That comment on Friday brought the U.S. trade war with China back to the fore, and sent stocks tumbling in a rout that wiped out $2 trillion in market value.

• Wall Street Has ‘White Knuckle Moment’ After Tariff Threat Sends Markets Reeling (WSJ)

  • Investors are taking a harder look at some of the market’s hottest investments than at any time since “Liberation Day.”

    Friday’s market slide—fueled by President Trump’s new threat of “massive” tariffs on goods from China—wasn’t huge by historical standards. But its breadth and its focus on red-hot tech shares and smaller banks rattled some analysts and portfolio managers, who had come to believe that the 2025 market advance had grown immune to trade-war tensions.

• China ‘not afraid of trade war,’ accuses US of ‘double standard’ for rare earths retaliation (CNBC)

  • China accused the U.S. of “double standards” and defended its new export controls on rare earths as a “legitimate” measure under international law.

  • On Oct. 10, Trump announced new tariffs of 100% on imports from China “over and above any Tariff that they are currently paying.”

  • The Chinese commerce ministry said that the U.S. actions “seriously undermined the atmosphere of the economic and trade talks between the two sides.”

• China tells US to back off threats, warns of retaliation (Bloomberg)

  • China has fully assessed the possible impact of the measures on the industrial and supply chains in advance and is convinced that the relevant impact is very limited, the ministry said. It added that the country is willing to strengthen dialogue and exchanges on export control with other nations to better maintain the security and stability of the global industrial and supply chains.

• Trump’s Fresh Tariff Assault Threatens China’s Fragile Economy (WSJ)

  • For thousands of manufacturers across China, it’s déjà vu—with implications for the country’s fragile economy. Earlier this year, after President Trump raised tariffs on Chinese goods to 145% in April, American customers of Alan Chau’s toy factory in southern China abruptly froze orders, sparking a cash crunch that brought his business to the brink. So it came as a relief when the U.S. and China reached a trade truce weeks later in mid-May, rolling back most of their tariffs on one another—and allowing Chau to resume shipping his products again.

• Investors Keep Pumping Money into Private Credit, Despite Red Flags (Barron’s)

  • Warning signs are piling up as people keep channeling cash into private-credit funds. Retail-oriented private-credit funds, investment pools that make loans to midsize companies, hold more than $213 billion, up nearly 50% in the past year, according to a report Friday from Goldman Sachs Together, they account for roughly half of the retail money invested across the alternative-asset universe. Goldman’s report also notes that the flow of money into other popular areas, such as infrastructure and private equity, grew at a faster clip in the past year.

• Wall Street's biggest banks are riding high as earnings season begins (Yahoo Finance)

  • Expectations will be put to the test starting Tuesday morning, when JPMorgan Chase (JPM), Citigroup (C), Goldman Sachs (GS), and Wells Fargo (WFC) kick off the ritual. Bank of America (BAC) and Morgan Stanley (MS) get going on Wednesday.

  • Through Oct. 10, shares of Citigroup, Goldman Sachs, JPMorgan, and Morgan Stanley have risen between 40% and 23% year to date, outperforming the S&P 500 index (^GSPC) by at least nine percentage points. Wells Fargo and Bank of America have performed roughly in line with the benchmark index. Three months ago, these same lenders were still shaking off the uncertainty caused by tariffs that began this spring, which had frozen deals and muted corporate borrowing activity.

What a difference a day makes. Last week’s expected move for SPX was about 1.2%. This week’s has doubled. That can open the market up to wilder swinsg in either direction.

This Week’s Expected Moves:

• SPX/SPY: 2.4%

  • QQQ: 2.8%

  • IWM: 2.8%

  • TLT: 1.4%

  • USO: 3.7%

One other note on the recent volatility and Friday’s spike in the VIX: the index jumped more than +30%, from about 16.5 to nearly 22 — one of the largest single-day moves in months. Historically, buying stocks after that kind of volatility surge has tended to pay off, though not all spikes are created equal; a move from 16 to 22 is very different from 30 to 40. This one depends on how quickly the rhetoric cools, and there are already signs that it’s doing so. Still, the market was clearly caught off guard, and such a sharp, sudden shift in implied volatility often leaves lingering effects on price action — including the potential for a squeeze higher if sellers were too quick to bail.

As for the week ahead, another round of data casualties from the government shutdown is expected, with reports such as PPI, Jobless Claims, and Retail Sales likely delayed. Friday’s Housing Starts data may still be released, but otherwise the focus will be on a busy slate of Fed speakers including Chair Powell on Tuesday, and Wednesday’s Beige Book — which will still be published since it comes from the operational FOMC. Of course, the China tariff headlines are likely to dominate early in the week. And with the bond market closed tomorrow after Friday’s sharp drop in yields, it’ll be worth watching whether we see a reversal higher when trading resumes Tuesday — particularly if this proves to be another “TACO” moment.

Economic Calendar: 

• Monday

  • Bond market closed / stock market open.

  • Fed Speak: Paulson

• Tuesday

  • Fed Speak: Bowman, Powell 12:20pm , Waller

  • IMF Meeting

• Wednesday

  • Fed Speak: Miran, Waller,

  • 2pm - Beige Book

  • IMF Meeting

• Thursday

  • Unlikely: PPI, Jobless Claims, Retail Sales

  • Fed Speak: Bowman, Kashkari

  • 8:30am - Philly Manufacturing

  • IMF Meeting

• Friday

  • 8:30am - Housing Starts (possibly)

  • IMF Meeting

This week marks the first key stretch of the new earnings season, with the major banks — and several large regionals — set to report. Friday’s spike in volatility opens the door for wider price swings, though much of that depends on whether volatility remains elevated or quickly fades with a market rebound. If stocks stabilize tomorrow, many of the current expected moves are likely to compress before reports later in the week — for instance, JPM’s current implied move of 4.7% could shrink closer to 3.5% if the VIX falls back below 18 by Tuesday.

Earnings (with expected moves):

• Monday

  • Pre-market: FAST 5%

• Tuesday

  • Pre-market: JPM 4.7%, C 5.2%, WFC 4.9%, GS 5.2%, BLK 3.9%, JNJ 3.1%

• Wednesday

  • Pre-market: ASML 7.5%, BAC 4.8%, MS 4.8%, DLTR 6%

  • After-hours: UAL 8%, JBH 6.3%

• Thursday

  • Pre-market: TSM 6.3%, INFY 7.2%, SCHW 5.4%

  • After-hours: IBKR 5.9%, CSX 4.6%

• Friday

  • Pre-market: ALLY 7.6%, SLB 5.3%, AXP 5.1%

One last note: there was plenty of talk about the “carnage” from Friday’s moves in equities and crypto — a clear sign that too many traders were overleveraged near the highs. Ironically, this kind of shakeout could end up serving as a springboard for the next move higher. Still, it’s an important reminder that the higher assets climb, the less leverage and exposure you want; a -5% pullback should never wipe out gains from a +50% rally. That’s just bad risk management.

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