by Jason Bodner
April 15, 2025
Uncertainty was once left to fate, divine will, or simple luck. But in the 16th century, Gerolamo Cardano—a mathematician, physician, and gambler—applied logic and numbers to it. He studied dice games and realized outcomes had measurable probabilities. His calculations prefaced modern probability theory. Cardano’s insight wasn’t just mathematical, it was philosophical. He sought to understand uncertainty rather than fearing it. His work inspired later thinkers, like Pascal and Fermat. Cardano helped shift the world from mysticism to measurement, fundamentally changing how we think about risk.
That doesn’t offer much comfort today. Uncertainty dominates, yet data is our only tool to navigate it. By analyzing similar periods in market history, we can attempt to frame possible, or probable, outcomes.
The Recent Carnage, In Perspective
On Friday, April 4th, the S&P 500 dropped nearly 6%, what statisticians would call a near six standard deviation move, based on one-year volatility. That kind of move has occurred on only 30-days since 1950—or just 0.16% of trading days. Some spectacular gains tend to happen after these rare events:
To make matters worse, the S&P 500 had already fallen -4.84% the day before, netting a two-day drop of over 10.5%. Since 1950, this has happened just six times—only 0.03% of the observed trading days.
The encouraging news is that forward returns from these levels have historically been strong:
Swimming in a stream that has consistently taken investors to significantly better outcomes over the next 6-, 9-, 12-, and 24-months should offer some reassurance.
A third consecutive down day occurred 2,042 times since 1950, across nearly 19,000-trading days. What tends to follow these 3-day streaks? Again, historical data suggests decent upside performance afterward.
Here are a few more studies of times similar to now:
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
Here is the same table from the year 2000 on:
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
The recent outflows are epic and historic. That said, it still bodes well for the future. On April 3rd we experienced 606 outflows. Here are the times we saw that level or more throughout history:
The very next day saw even more destructive outflows – a total of 946 – but history is still on our side:
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
The four-day cumulative total outflows on April 8th hit 3,142 stocks being sold. This happened 12 times in history, including April 8th and 9th. Markets were higher 100% of the time one and two years later:
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
So, while this was an undoubtedly a rough stretch, history implies a high probability of improvement.
Market Mechanics
The current sell-off seems to be driven largely by hedge funds. Asian funds in particular have reportedly been liquidating shares. JPMorgan analysts estimated that margin debt usage dropped 5%-6% last week.
That signals deleveraging, a pullback in borrowed investment exposure. As margin unwinds, the system resets. Though uncomfortable, these corrections often lay the groundwork for the next leg higher.
Recession fears are intensifying, and that’s causing banks and brokers to tighten credit and reduce their exposure. The good news? As leverage exits the system, risk assets become more attractively priced, which often leads to strong forward performance once confidence returns.
Money Flows
The Big Money Index (BMI) will surely drop in the coming days, due to the monstrous outflows:
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
The outflows were the most seen in many years, if ever. Equity outflows are the highest since COVID:
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
ETFs were the highest outflows on record:
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
Recently, resilient defensive sectors were not spared the destruction. This indicates capitulation selling when the baby is thrown out with the bathwater. Uncertainty is a powerful thing:
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
The Trade War Question
How long will trade tensions last, and how much damage will they do? That’s the million-dollar question.
President Trump appears to be using tariffs as a high-stakes negotiation tactic. In his latest Truth Social post, he warned: “Yesterday, China issued Retaliatory Tariffs of 34%, on top of their already record-setting Tariffs, Non-Monetary Tariffs, Illegal Subsidization of companies, and massive long-term Currency Manipulation… Therefore, if China does not withdraw its 34% increase… the United States will impose ADDITIONAL Tariffs on China of 50%, effective April 9th.”
Trump is playing hardball, aiming to force renegotiation of global trade. It might work. Or not. We already have early indications of resolution in that 75 countries reportedly called to negotiate, resulting in a 90-day pause on tariffs. That news sent markets to their best day of performance in decades.
Either way, we seem to be heading toward either a narrower trade war with China, as opposed to a broader global standoff. My view is that Trump’s strategy serves multiple goals:
- Force fairer trade balances.
- Generate new revenue streams through tariffs.
- Pressure the Fed to lower interest rates by increasing market volatility.
- Enable future domestic tax cuts using tariff proceeds.
While that may sound like an economic utopia—lower rates, lower taxes, higher revenue—it’s a possibility based on a massive gamble. Even if it pays off, it will take time.
Let’s put it into perspective. In August 2007, Bear Stearns’ internal credit fund collapsed, a precursor to the 2008 financial crisis. From that moment to the market bottom in March 2009 took 19 months That crisis nearly collapsed the global financial system. Trade tensions, while serious, do not come close to that level of systemic risk. They also don’t compare to the risks we faced during COVID-19. Or 9/11.
Reality Check
Ask yourself: Will we still drink coffee or orange juice tomorrow morning? Will grocery stores still be open? Will people go to work? Will your kids still go to school, music lessons or Little League?
Yes. Life will go on. Maybe not the same. Maybe more expensive. But not stopped.
For those with cash on the sidelines, now is a time to consider deploying it. Is this the bottom? No one knows. Could we go lower? Absolutely. Could we recover and see new highs by year-end? Yes.
I can’t assign probabilities to any of these outcomes, beyond historical precedent. But that precedent shows an asymmetrical payoff to the upside. The longer your time horizon, the better your odds.
When shopping for stocks, look for businesses you know will be around in five, 10 or 20 years. If you’re a W-2 worker contributing to a 401(k), take comfort in the fact that you’re buying in at lower levels. Watching your portfolio shrink is hard—but remember, losses aren’t realized until you sell.
It’s the same with your home. If your neighbor sells their house below market due to distress, your home value may appear lower on paper. But unless you sell it, you haven’t lost anything.
Long-term investors know that staying invested during painful periods often leads to outsized rewards. In fact, the best time to buy is usually when things feel the worst.
Sales in the stock market don’t look like Black Friday bargains. They look like bloodbaths.
Like distressed real estate, this is when great opportunities emerge. I still believe in America. At the height of the 2008 crisis, Warren Buffett wrote in an op-ed:
“Be fearful when others are greedy, and greedy when others are fearful.”
Wise words. Will we heed them? Is this a time to fear? Or a time to embrace opportunity?
The answer lies within you.
All content above represents the opinion of Jason Bodner of Navellier & Associates, Inc.
Also In This Issue
A Look Ahead by Louis Navellier
Our Trade War is Now Only with China, Not the Whole World
Income Mail by Bryan Perry
A Bond Market Sell-Off is Anything But a “Yippy” Reaction
Growth Mail by Gary Alexander
Happy Tax Day and 250th Birthday, America
Global Mail by Ivan Martchev
Could the Surge in Treasury Yields Be the Market’s “Shot Across the Bow?”
Sector Spotlight by Jason Bodner
Probability is Harder to Track During this New “Age of Uncertainty”
View Full Archive
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Jason Bodner
MARKETMAIL EDITOR FOR SECTOR SPOTLIGHT
Jason Bodner writes Sector Spotlight in the weekly Marketmail publication and has authored several white papers for the company. He is also Co-Founder of Macro Analytics for Professionals which produces proprietary equity accumulation/distribution research for its clients. Previously, Mr. Bodner served as Director of European Equity Derivatives for Cantor Fitzgerald Europe in London, then moved to the role of Head of Equity Derivatives North America for the same company in New York. He also served as S.V.P. Equity Derivatives for Jefferies, LLC. He received a B.S. in business administration in 1996, with honors, from Skidmore College as a member of the Periclean Honors Society. All content of “Sector Spotlight” represents the opinion of Jason Bodner
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