5 Things We Learned This Week - 3/30/2025
March 29, 2025
The S&P 500 fell 1.5% this week. The Bloomberg Aggregate Bond Index was flat, Gold rallied 2.0%, and Bitcoin declined 0.3%.
Tariff fears continued to weigh on investor sentiment this week, along with a spate of poor economic data. Consumer confidence fell to 92.9, below its 2022 low. The Future Expectations Index fell to 65.2, well below the Conference Board's Recession Warning Threshold of 80. The Core PCE Price Index also came in hotter than expected at 2.8%, while the University of Michigan survey of expectations for future inflation rose to 4.1% (double the Fed's 2% inflation target). As 5 Things has been writing about for months, the inflation genie is out of the bottle, and price pressures will probably accelerate from here.
How Silverlight Is Hedging Bear Market Risk
Bear markets can bring misery or opportunity - it all depends on how you're positioned. At Silverlight, we proactively prepared clients for the current market selloff by getting defensive early.
The S&P 500 made an all-time closing high on February 19. Three days later, 5 Things wrote: "A trend is your friend until it ends," and we went on to describe an important technical indicator that was waiving a cautionary flag for the S&P 500. "If Silverlight clients are wondering why we have been raising extra cash in portfolios lately, now you know why. We protected capital in 2022 by raising cash early, and we will tread carefully this year until there is sufficient evidence to label this a false sell signal."
Currently, the S&P 500 is down about 10% from the high. The pace of the decline has been swift and investor sentiment is already very depressed. CNN's Fear Greed Indicator is registering "Extreme Fear," and the tenor of the news over recent days has been slanted quite negative. Even if this is a bear market, it won't be a straight line down. Given how oversold the market is, we recently tactically increased our investment exposure to capitalize on the above-average potential for a bullish bounce.
Independent of short-term tactical considerations, our medium-term outlook for risk assets remains defensive. We are hedging the risk of a bear market by keeping higher than normal cash, overweighting defensive sectors, and occasionally using inverse ETFs to short overvalued stocks like Nvidia. In a recent MoneyShow virtual talk, Michael Cannivet discussed why he thinks there is abnormally high risk for a bear market this year. He provided a list of macro clues he uses to decide when it's time to get defensive and shared ideas on how investors can protect their portfolio. If you'd like to watch the presentation, you can do so here.
Investors Are Nervous About Liberation Day
Investors are on edge as Donald Trump’s “Liberation Day” approaches on April 2. He's hyping it as a turning point for America’s economic fortunes. In Trump’s view, Liberation Day is about reclaiming what he sees as wealth and respect stripped from the US by decades of unfair trade deals and exploitation by both allies and adversaries. He believes the country has been “ripped off” by nations charging high tariffs on American goods while enjoying low barriers to the US market. To him, it’s a chance to flex strength, level the playing field, and spark a manufacturing renaissance—making it a good thing because it restores American dominance and jobs.
The nerves stem from his plan to unveil a wave of reciprocal tariffs, matching what other countries impose on US exports. Think 25% duties on cars and parts, or levies on oil-buying nations like Venezuela’s trade partners. Markets hate the uncertainty—will it be targeted or a chaotic free-for-all? Hedge funds are hedging with shorts and put options. Post-event, these hedges typically unwind, which spurs rallies. If Trump’s tariff details don’t overshoot worst-case fears, that’s likely here.
April’s got tailwinds too—stocks rise 80% of the time historically, one of the year’s strongest months. What’s he announcing? A mix of tariffs, likely narrower than his loudest threats, but still a hefty shift—think autos, agriculture, maybe China-specific hikes. We’ll wait for the fine print, but hitting the panic sell button now? Probably premature. Patience could trump fear in the short-term.
The Inflation Outlook Is Distorted By Biased News Coverage
Friday was an interesting day to follow dual news coverage on the major news networks. On CNN, the most important economic news was the market selling off sharply due to tariff and inflation fears. On Fox, the main story was the progress DOGE is making by cutting government waste.
Whether you're an R, D, or an I, it's important to recognize that most modern media purposefully skews coverage to report the news their audiences want to hear. This explains the unprecedented gap in inflation expectations by political party. Democrats expect 4.6% future inflation, while Republicans see only 1.3% inflation. Independents expect 3.7% inflation.
Confirmation bias is running wild in today's media, and it's affecting the markets. It's OK if you view your favorite media propaganda machine as a form of entertainment. When making investing decisions, however, finding the truth is far more imperative. The best way to circumvent confirmation bias and fake news is to do your own critical thinking. Try watching R and D network coverage. The truth is never perfectly clear on either network. More often than not, it's somewhere in the middle.
IREN Limited: A Strategic Crypto And AI Infrastructure Investment
IREN Limited (IREN) is a company that combines two exciting technologies: Bitcoin mining and artificial intelligence. IREN was Silverlight's best performing stock last year. We sold after it more than doubled. This week, we bought it back after a 38% year-to-date decline.
IREN offers a compelling investment case for those willing to look beyond the noise. In today's tech investment landscape, few opportunities present the unique convergence of established cash flow and future growth potential quite like IREN. The vertically integrated model—spanning data centers, power generation, and Bitcoin mining—positions the company to capture value across the value chain. IREN has secured an impressive 2.75 gigawatts of power capacity in West Texas through binding agreements. This power infrastructure, strategically positioned in one of America's largest renewable energy markets, provides the foundation for sustained competitive advantage.
Also, the company's dual-revenue model delivers both immediate returns and long-term growth. While their Bitcoin mining operations scale toward industry-leading efficiency, management is simultaneously building out AI infrastructure. This includes their 75MW liquid-cooled Horizon 1 facility, which is designed specifically for next-generation GPU demands.
IREN has healthy financial flexibility with $457 million in cash reserves, positioning the firm to execute their ambitious growth strategy without dilutive financing concerns. The shares trade at just 1.2 times estimated sales, which seems far too cheap given that sales are projected to double each of the next two years. Silverlight is bullish IREN.
Even When You're Blue, Go Out Anyway
This week while visiting Palm Springs, I was transported to another era while visiting an iconic supper club. A jazz singer in the most glittery outfit I've ever seen told the following tale about an important encounter there.
Picture a night at a swanky joint in the early 1960s. Frank Sinatra sits at a corner table, nursing a drink and a broken heart after a bad breakup. The crowd buzzes when he takes the stage, but his song choices—slow, mournful—drag the room down. Dean Martin, sensing the slump, saunters up, cracks a joke, and croons something light. Sammy Davis Jr. follows, all energy and charm, and suddenly, the place is electric. Three legends, unplanned, unscripted, clicking like they’d rehearsed it. An RCA Records exec catches the show and sees gold: these guys could own Las Vegas. He’s right. The Rat Pack went on to become a juggernaut—fans flocked to their Sands residency, and Ocean’s 11 became a Hollywood classic.
Take it from the man they called Blue Eyes; even when you're feeling blue, it's good to go out with your friends. You never know when serendipity may strike and turn that bad thing you're obsessing about into a beautiful new chapter of your life.
This material is not intended to be relied upon as a forecast, research or investment advice. The opinions expressed are as of the date indicated and may change as subsequent conditions vary. The information and opinions contained in this post are derived from proprietary and non-proprietary sources deemed by Silverlight Asset Management LLC to be reliable, are not necessarily all-inclusive and are not guaranteed as to accuracy. As such, no warranty of accuracy or reliability is given and no responsibility arising in any other way for errors and omissions (including responsibility to any person by reason of negligence) is accepted by Silverlight Asset Management LLC, its officers, employees or agents. This post may contain “forward-looking” information that is not purely historical in nature. Such information may include, among other things, projections and forecasts. There is no guarantee that any of these views will come to pass. Reliance upon information in this post is at the sole discretion of the reader.