Navigating market corrections and global economic shifts: Insights from Jurrien Timmer

Understanding market corrections

Timmer begins by addressing the current market correction, noting that the S&P 500 has experienced a 10% decline, while the Magnificent 7 and Russell 2000 have fallen by 22% and 20%, respectively during January - March 2025. He emphasizes the importance of surviving the periods when the market is down, as equities tend to deliver healthy returns over the long term. The key, according to Timmer, is to remain analytical and avoid emotional reactions during downturns.

Technical analysis and market trends

Drawing on his background as a technical analyst, Timmer examines the S&P 500 Equal Weighted Index, noting a bullish divergence in the percentage of stocks above their 50-day moving average. This suggests that the recent decline may be a temporary setback rather than a cause for concern. However, he cautions that the Magnificent 7's decline appears more impulsive, indicating potential churn in the coming months.

Global market dynamics

Timmer shifts focus to the global market, highlighting the contrasting performance of the U.S. and other regions. While the U.S. is in a correction, markets in China and Europe have shown resilience. He points to the MSCI China Index, which has rebounded from being deemed non investable, and the MSCI ACWI ex USA Index, which is nearing a new high. This divergence underscores the importance of diversification for investors.

China's economic landscape

China's recovery is particularly noteworthy, with the country pivoting away from being a value trap due to policy changes and a fiscal impulse. Timmer explains that China's main challenge is unlocking consumer spending, as the savings rate remains high. The government needs to create a more appealing backdrop to stimulate domestic consumption.

Impact of tariffs and trade policies

Timmer touches on the impact of tariffs, noting that while they initially forced China to pivot, the country is now less vulnerable to such measures. He argues that China's wounds were largely self-inflicted, stemming from a property bubble and market-unfriendly policies. The government is now walking back some of these policies to compete more effectively.

U.S. market and economic policies

Turning back to the U.S., Timmer discusses the implications of the Trump administration's policies, including deregulation and tax cuts. He raises concerns about the potential for a recession, given the government's spending cuts and the Federal Reserve's limited ability to counteract economic downturns. The market is grappling with the possibility that tariffs may be an end in themselves, rather than a means to better trade terms.

Central banks and monetary policy

Timmer provides an update on the Federal Reserve's recent decision to hold rates steady, aligning with market expectations. He emphasizes the importance of the long end of the yield curve, noting that the 10-year yield remains stable. This stability is crucial for mortgage rates and corporate debt refinancing.

Global fiscal impulses

The discussion extends to other central banks, particularly the European Central Bank and the Bank of Japan. Timmer highlights the rapid repricing of the term premium in Germany, driven by a fiscal impulse. He explains that fiscal measures, whether in the U.S. during COVID-19 or in Germany now, come at a cost, either through currency depreciation or higher bond yields.

Bitcoin vs. gold

In the final segment, Timmer compares Bitcoin and gold, viewing them as different players on the same team of hard assets. He notes that the combined market value of gold and Bitcoin is now $20 trillion, reflecting the growing market share of hard money as the money supply expands. Timmer speculates on the future growth potential of Bitcoin, suggesting that while it may not fully demonetize gold, it could continue to gain market share over the next decade.

Conclusion