Shootout at the Tariff Corral

Vol trades for the upcoming tariff tantrum

Let’s be honest, it’s been quiet on the tariff front the last few days- relatively quiet in contrast to the almost hourly tape bombs markets were dealing with a little over a week ago. Hope you’ve rested up, we are about to reenter the rear eyewall of the tariff hurricane and it should worsen as we get closer to April 2.

There will be confusion; like maybe more rays of hope for some sanity to avoid an economic meltdown; here is an example from a Bloomberg story on Monday:

https://www.bloomberg.com/news/articles/2025-03-17/trump-trade-chief-pushes-for-order-after-rocky-tariff-rollout?sref=1zxv5xkq

“Cool-headed” and “inject order” in the goal of calming markets. Consider me skeptical.

This below from yesterday seems more plausible:

https://www.washingtonpost.com/business/2025/03/19/trump-tariffs-imports-liberation-day/

He will turn ‘billions and billions’ into ‘trillions and trillions’, and markets are obviously not going enjoy this. Opex week has been a stabilizing force to a degree (as you can see clearly this morning with the 50pt mechanical bounce), but then again there was a bit of tariff fatigue and a respite being that “Liberation Day” was three weeks away. Now it’s thirteen days and option markets will unclench into a period where stewards of capital will most certainly be sitting on their hands.

There are lots of charts going around with the theme blather being that we are so oversold and certain folks needing to buy/rebalance. A sample:

Total systemics (risk parity/CTA/vol control):

And of course, CTAs will need to buy supposedly:

And so will pensions need to rebalance bonds vs. stonks:

And folks have with lightning speed left U.S. stocks, as evidenced by the BAC fund manager survey, which folks think is bullish in that the selling is over (I beg to differ):

And onto Europe, another rotation attempt that will probably fail in time, since these countries will not escape unscathed in a global trade war:

Here’s a good way of looking at how much the S&P might need to catch up with macro sentiment:

These sentiment surveys lately are amazing in how sensitive/schizophrenic they are, which makes sense considering we are once again leaving a prolonged period of vol smashing support for markets that went up every month like a ticking clock:

Like AAII:

But with all the evidence above of systemic/fund manager/sentiment washouts combined with certain parties needing to buy, retail has ignored this and continued to pour money into the market on recent dips, remarkably unfazed:

So, that’s the landscape for the end of the month/quarter staring at an oncoming tariff tantrum. Time for some fresh trades for tariff vol week.