March 16, 2025

The S&P 500 declined 2.2% this week. The Bloomberg Aggregate Bond Index was flat. Gold rallied 2.6% and Bitcoin shed 2.6%. Did all the people who sold Bitcoin this week buy gold? 

Both the CPI and PPI reports came in cooler than expected for February. We expected this month's readings to temporarily cool due to base effects and other factors. Barring a dramatic slowdown in the economy, inflation will likely reaccelerate later in the year as base effects ease and tariff cost pressures rise. Small business and consumer sentiment fell sharply last month in reaction to the new administration's haphazard and volatile communication strategy around its tariff policy. Many Americans are worried about higher costs and dimmer job prospects going forward. The Policy Uncertainty Index is near an all-time high, which likely equates to a more tepid earnings outlook and a lower P/E multiple for the S&P 500. In this environment, dip buyers should be patient and disciplined.

Quarter End Rally? 

In recent weeks, 5 Things has profiled a growing list of bearish signals. The S&P 500 is currently down about 10% from its all-time high on February 19. Last week, we mentioned there were short-term oversold conditions that typically produce at least a short-term bounce. Geopolitical headlines could still strike at any moment and instigate a selloff, but there is another key reason to be more tactically bullish heading into the end of this month: target date-fund rebalancing. 

StoneX macro strategist, Vincent Deluard, explained the mechanics of how rebalancing these funds impacts the market in his weekly note. "Long-term Treasuries have outperformed the S&P 500 index by 14% in the past 46 days, the biggest and fastest relative rally in the post-COVID era. A target-date fund with $60 bn in stocks and $40 bn in Treasuries on January 23 would have $55 bn in stocks and $42 bn in Treasuries as of Monday’s close. If this fund attempted to rebalance to its policy weights by the end of the quarter, it would need to sell $3 billion of Treasuries, or 7.4% of its holdings. The target-date fund industry manages $4 trillion. This shift in asset allocation will likely cause bonds to sell off in the last week of March, while stocks could enjoy a good rebound --- as they have in the prior four corrections. Note that this shift is completely decoupled from fundamentals, valuations, or prices. If Treasuries sell off and stocks rebound in the next two weeks, pundits and strategists will surely create narratives to explain the move: 'the trade war is cancelled', 'Trumpism is working', 'the market is pricing a new era of peace,' etc. In reality, the tail is wagging the dog: large quarter-end cross-asset moves happen because a 'hungry target-date whale must feed."

Given that sentiment is very depressed and a bullish fund flow catalyst is approaching, Silverlight clients will likely see us temporarily add to market exposure in the coming weeks. We are still cautious over the intermediate-term, and will remain so until more policy clarity emerges. 

The Crypto-Presidential Complex: A New American Direction?

Bitcoin soared past $109,000 after President Trump's inauguration. However, bullish sentiment has faded. After a string of eyebrow raising announcements, many in the crypto community aren't sure just how committed to the cause Trump really is. Does he believe in Bitcoin as a superior long-term solution for the country, or is he just looking to temporarily pump it up so he can add billions more to his net worth?

This week, it was reported the Trump family is negotiating a potential stake in Binance, the world's largest crypto exchange. The timing is suspect, because its founder, Changpeng Zhao, is reportedly seeking a pardon after pleading guilty to violating regulations. Critics question the ethics of leveraging presidential power for personal gain.

Trump established a "Strategic Bitcoin Reserve" by executive order, despite opposition from lawmakers like Rep. Gerald Connolly, who argue it benefits the President and his allies at taxpayers' expense. The Trump family’s crypto ventures include launching their own meme coins, expanding Trump Media into financial services, and World Liberty Financial - an entity that has been amassing crypto assets. 

The Trump Administration may still be a bullish tailwind for crypto assets. But at what price? What is the American government becoming if we allow Presidents to actively build businesses that directly benefit from policies they are enacting? Is that free market capitalism, or is America turning a new direction? Silverlight remains long Bitcoin but has scaled back on broader crypto exposure. 

International Stocks Surge Ahead of US Equities in 2025

Year to date, international stocks have outpaced US stocks by a striking 12.4%, with the MSCI World ex-USA Index climbing 8.5% compared to the S&P 500’s 3.9% loss. This shift stems from a weaker dollar, undervalued foreign markets, and variant economic policies. Europe and Asia, buoyed by fresh stimulus and recovery, are stealing the spotlight. Germany's historic €500 billion infrastructure spending plan signals the death of fiscal orthodoxy in Europe's largest economy. This policy pivot exempts defense spending above 1% of GDP from debt rules while creating a massive infrastructure fund disbursed over the next decade. Takeaway: US stimulus is fading, while the rest of the world is heading the other direction. 

The Bloomberg World ex US Index trades at a P/E ratio of 15.3, whereas the S&P 500 trades at a P/E of 22.9. “Investors are waking up to the value beyond US borders,” notes Jane Foley, head of FX strategy at Rabobank. If foreign governments retaliate in the escalating trade war by curbing US investment flows, this trend could deepen. Reduced capital inflows would pressure US equities, while boosting foreign markets as cash redirects. With policy catalysts for global diversification in play, international stocks may keep their edge. Since 2010, US stocks have outperformed the rest of the world to an unprecedented degree, which could result in a dramatic mean reversion. This is why Silverlight is a fan of international diversification.  

Has Apple Forgotten How To Innovate?

Apple, once the undisputed king of tech innovation, is stumbling in the race for large language model (LLM) supremacy. While rivals like OpenAI and Google churn out conversational AI that dazzles, Apple’s Siri remains a relic—clunky, limited, and frankly embarrassing for a $3 trillion titan.
 
A recent Apple News piece says the company’s LLM efforts are “way behind the curve” as competitors leverage cloud-scale AI to redefine user experiences. Meanwhile, David Sparks laments Siri’s woes, pointing to delays in promised upgrades that leave it trailing Amazon’s revitalized Alexa. Apple’s obsession with on-device processing—noble for privacy—caps its ability to harness the raw power of cloud-based LLMs. 

If Apple wasn't already one of the biggest stocks in the world and an automatic passive flow beneficiary, it would likely trade at a much lower valuation. Apple trades near its highest valuation ever. This makes no sense given that the company is barely growing, and clearly falling behind the curve on the biggest innovation trend of the decade. 

Travel Is The Best

Post-COVID, Americans are packing their bags like never before. The US State Department issued over 24 million passports in 2023—up 20% from pre-pandemic 2019 highs—showing we’re itching to explore beyond our borders. That’s a serious leap from the grounded days of 2020. Why is this a win? Travel is a wellbeing booster! 

Psychology Today’s Kristen Fuller, M.D., lists six mental health benefits associated with travel: 1) it slashes stress with a change of pace, 2) builds resilience through new challenges, 3) deepens relationships via shared adventures, 4) sparks awe with stunning vistas, 5) sharpens your brain with problem-solving, and 6) fuels happiness through cultural dives.

From Mexico’s beaches to Europe’s castles, travel rewires you for the better—less stress, more grit, tighter bonds. Where’s your next escape?

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.​​