Feeling the Heat

As of Sunday evening, April 6, 2025, we’re feeling the heat—along with many of you—over the market’s reaction to what’s widely seen, and what we see, as an ill-advised tariff war. Today, Monday, could mark the third straight day of declines exceeding 5%. If that holds, this 15%+ plunge over three days would rank among the five worst short-term drops since 1929.

As of this morning, the market’s down roughly 26% from its February peak. For perspective, here’s how it stacks up against history’s ugliest drawdowns:

• The 1929 crash: a 22% loss in just two days.

• Black Monday, 1987: a 22% single day free-fall.

• The 2008 Crisis: a grueling 53% peak-to-trough slide over months, with October 15, 2008, etched in our memory as the worst single day.

• March 16, 2020: a 13% one-day gut punch.

Here’s the silver lining: markets recover. They always do—eventually. Whether that rebound comes in weeks or stretches beyond five years depends on how fast stability returns. What’s unprecedented is a sitting president seemingly intent on derailing both a robust market and the broader economy. There may be a method to this madness, though. With $6 to $9 trillion in fixed income needing refinancing at lower rates to dodge a deeper crisis, pushing the 10-year yield below 4% and softening the USD makes sense, and this has already happened. But cratering the market via the chaotic fallout of a tariff war? That’s a reckless way to get there.

Technically—some may say voodoo analysis—the S&P 500 might find a floor at 4800, where it is traded this morning. If that level buckles, 3700 could be the next stop on this tariff-fueled descent. Yet, strip away the trade war noise, and the macro setup—detailed below—hints at a rally or at least some stability.

This tariff war is a beast: complex, potentially inflationary one day and deflationary the next, packed with numbers cherry-picked for narratives, signaling U.S. frustration at being exploited, and maddeningly unpredictable. That randomness makes it nearly impossible to model its impact on the metric that matters most: corporate earnings. Until Wall Street cracks that code, uncertainty will reign. Expect heightened volatility through 2027—unless the tariff war miraculously ends, which feels like a long shot, but again it’s so hard to predict in the midst of chaos.

So, what’s this mean for your portfolios? We raised cash Friday, specifically capturing capital losses in name and positions we don’t want to own going forward and will redeploy it strategically. Expect us to get more active short-term—locking in gains, biding our time. A rally’s coming, but with Wall Street rattled, volatility’s here to stay for now.

We’re sticking to themes we trust. Take AI: the market’s written it off amid the tariff chaos, but it’s just getting started. Nvidia’s Blackwell chip rollout is poised to cement its dominance. We dipped into the SMH (Semiconductor ETF) this morning with a modest stake, sized to grow if the slide continues. We’re betting Nvidia and its peers will deliver alpha down the road.

Energy is another focus. The US, indeed the globe, needs many, many more electrons to power the AI future. For eligible clients, we’re recommending the CAZ Energy Evolution Fund. We’ll also lean into general energy stocks and master limited partnerships (MLPs), where yields now top 10% amid oil drawdowns. We can’t promise much, but oil’s staying relevant for decades.

Finally, with 10-year rates dipping below 4%, private real estate opportunities are on our radar. New deals should emerge soon. Added cash flow from real estate rentals provides additional ballast against equity volatility, and funds families’ lifestyles.

One more thought around crypto. Global liquidity drives Bitcoin and alt coins prices. Liquidity is rising as the US dollar falls in value, oil prices drop, and central banks and government either are or are getting ready to juice their economies amidst the current volatility. And yet, crypto prices are falling. What does this mean? Uncertainty hurts investing, especially in the most speculative assets, but long term the drivers for a recovery in crypto markets are strongly in place.

Your friends and advisors in patience,

Jeff & Biff

April 7, 2025

PS  A vacation in the midst of a market meltdown is not much of a vacation, says Biff

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CrossGrain Family Investments, LLC

2213 Loreines Landing Court

Henrico, VA 23233 

CrossGrain Family Investments, LLC is a Federally-Registered Investment Adviser. All views, expressions, and opinions included in this communication are subject to change. This communication is not intended as an offer or solicitation to buy, hold or sell any financial instrument or investment advisory services. Any information provided has been obtained from sources considered reliable, but we do not guarantee the accuracy or the completeness of any description of securities, markets or developments mentioned. We may, from time to time, have a position in the securities mentioned and may execute transactions that may not be consistent with this communication's conclusions. Please contact us at 804.217.2561 if there is any change in your financial situation, needs, goals or objectives, or if you wish to initiate any restrictions on the management of the account or modify existing restrictions. Additionally, we recommend you compare any account reports from CrossGrainFI with the account statements from your Custodian. Please notify us if you do not receive statements from your Custodian on at least a quarterly basis. Our current disclosure brochure, Form ADV Part 2, is available for your review upon request, and on the SEC website, https://adviserinfo.sec.gov. This disclosure brochure, or a summary of material changes made, is also provided to our clients on an annual basis.