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The S&P 500 benchmark index closed Tuesday at its lowest level since November 4, wiping out gains accumulated since President Donald Trump’s November 5 election victory. Investor anxiety surged over concerns that the administration’s sweeping tariffs could dampen economic growth. The tech-heavy Nasdaq Composite briefly dipped into correction territory—defined as a 10% decline from its recent peak—before rebounding slightly. The index closed down 0.4% at 18,285.16, its lowest finish since November 4, after hitting an intraday low of 17,956.60. “Tariffs are likely to exert upward pressure on inflation and weigh on economic growth at the margin—an unfavorable combination for risk assets broadly,” said Josh Jamner, senior investment analyst at ClearBridge Investments. On Tuesday, the U.S. imposed 25% tariffs on imports from China and Mexico, along with an additional 10% tariff on Chinese goods, adding to last month’s 10% levy. China and Canada retaliated with their own measures, while Mexico is expected to announce its response by Sunday. After markets closed, Commerce Secretary Howard Lutnick suggested in a television interview that President Trump might be open to meeting Canada and Mexico halfway, potentially easing tariffs as early as Wednesday. A Nasdaq close below 18,156.50 would confirm a correction, reflecting a 10% drop from its record close of 20,173.89 on December 16. If the index falls 20% from its high, it would enter a bear market. The Nasdaq reclaimed its 200-day moving average of 18,376.37 after closing just below the level on Monday—a key technical indicator often seen as a gauge of the market’s long-term direction. The Dow Jones Industrial Average finished down 670.25 points, or 1.6%, at 42,520.99, after sliding as much as 843 points intraday. A close below 40,512.64 would confirm a correction from its record high of 45,014.04 set on December 4. The S&P 500 dropped 71.57 points, or 1.2%, to 5,778.15—its lowest close since November 4. A decline below 5,529.74 would confirm a correction from its February 19 record close of 6,144.15. The index flirted with its 200-day moving average of 5,725, a level not tested since November 2023. Jonathan Krinsky, chief market technician at BTIG, suggested this level could spark a short-term rebound, but warned that the market might require a more complex bottoming process. “The question isn’t whether we bounce at the 200-day moving average—it’s what happens after the bounce,” Krinsky wrote. “Investors are accustomed to ‘V-shaped’ recoveries, but we need to consider the possibility of a ‘W-shaped’ bottom, with a bounce followed by a re-test later this month.” Escalating trade tensions have heightened fears of a slowdown or recession, further unsettling markets. Nancy Tengler, chief executive and chief investment officer at Laffer Tengler Investments, believes the market is sliding into a correction. “Corrections always feel painful in the moment, and I believe we’re in one now,” Tengler wrote. She noted that corrections typically occur every 12 months and are often triggered by catalysts that seem dire at the time. “This time, it’s tariffs,” Tengler said. “The key is not just assessing the tariffs themselves, but their duration. If they’re short-lived, this could present a prime buying opportunity for long-term investors.” John PaulJohn Paul is the founder of DayTradeToWin, a trading education and software company established in 2008, supporting traders worldwide. His expertise focuses on price action-based futures trading strategies and structured market analysis. DayTradeToWin delivers trading education, indicators, and software tools designed to help traders apply disciplined, rule-based decision-making across global futures markets. He is the creator of multiple trading methodologies, including the Sonic System, Atlas Line, and Trade Scalper, which help traders identify structured opportunities in markets such as the E-mini S&P 500 (ES), Nasdaq (NQ), crude oil (CL), and gold (GC). Official website: https://daytradetowin.com daytradetowin.com

Global Investment Returns Yearbook Reveals Profitable Yet Volatile Stock Market A viral clip from Ferris Bueller’s Day Off, featuring economist Ben Stein’s monotone explanation of the Smoot-Hawley Act, has sparked renewed interest in economic history. The Act, which aimed to raise tariffs but inadvertently deepened the Great Depression, raises questions about its relevance in today’s economic landscape. On Tuesday, UBS released its Global Investment Returns Yearbook, offering a comprehensive analysis of 125 years of market performance. Compiled by Paul Marsh and Mike Staunton from the London Business School, along with Elroy Dimson from Cambridge University, the report highlights the long-term profitability of stock investing alongside its inherent volatility. Since 1900, U.S. stocks have delivered 6.6% annualized inflation-adjusted returns, significantly outperforming bonds at 1.6% and bills at 0.5%. Global markets outside the U.S. averaged 4.3% annually, reflecting consistent U.S. market outperformance—though recent months have shown a shift in this trend. The study emphasizes the volatile nature of stock markets, noting that recovery from major downturns often takes years. Investors waited 15.5 years to recover from the Great Depression, 10 years following the 1970s oil shock, 7.5 years after the dot-com crash, and four years post-global financial crisis. International diversification, a strategy popularized in 1974, has delivered mixed results. While most countries benefited, U.S. investors have seen little improvement in returns. The authors still advocate for diversification, cautioning that while it enhances the likelihood of better outcomes, success is not guaranteed. Cross-asset diversification has also shown long-term benefits, despite recent inflationary periods challenging its effectiveness. The 60/40 portfolio model (60% stocks, 40% bonds) remains a reliable strategy, offering better risk-adjusted returns than stocks or bonds alone. Stock market diversification pays off as well. Analyzing 64,738 companies across 42 countries from 1990 to 2020, the report found that 57% of stocks underperformed Treasury bills, and 71% trailed the index. However, gains from top-performing stocks more than compensated for these losses. Timing the market is notoriously difficult. Avoiding the worst 20 months over the past 125 years would have boosted returns by over 3% annually, but missing the best 20 months would have reduced returns by nearly 3% annually. The authors advise broad diversification unless one possesses exceptional stock-picking skills. Despite concerns about investing at market highs, historical data shows they are not reliable sell signals. Elroy Dimson remarked that investors who exited the U.S. market fearing overconcentration missed out on significant gains. Paul Marsh’s advice for investors is straightforward: “Don’t check your portfolio too often. Stay invested.” This timeless strategy remains particularly relevant amid today’s market uncertainties. John PaulJohn Paul is the founder of DayTradeToWin, a trading education and software company established in 2008, supporting traders worldwide. His expertise focuses on price action-based futures trading strategies and structured market analysis. DayTradeToWin delivers trading education, indicators, and software tools designed to help traders apply disciplined, rule-based decision-making across global futures markets. He is the creator of multiple trading methodologies, including the Sonic System, Atlas Line, and Trade Scalper, which help traders identify structured opportunities in markets such as the E-mini S&P 500 (ES), Nasdaq (NQ), crude oil (CL), and gold (GC). Official website: https://daytradetowin.com daytradetowin.com

JPMorgan Boosts European Defense Companies’ Price Targets by 25% Amid Rising Military Budgets European defense stocks experienced a significant rally as JPMorgan raised price targets for key companies by an average of 25%, driven by escalating defense spending across the continent. The market surge followed a diplomatic confrontation between President Donald Trump, Vice President J.D. Vance, and Ukrainian President Volodymyr Zelensky. The tense exchange, coupled with growing fears of reduced U.S. security support, spurred European governments to accelerate defense spending commitments. On Monday, several European defense companies posted double-digit gains. Germany’s Rheinmetall jumped 10.3%, the U.K.’s BAE Systems climbed 14.1%, Italy’s Leonardo advanced 9.1%, France’s Dassault Aviation surged 14.9%, and German radar systems maker Hensoldt soared 19.3%. The Stoxx aerospace and defense index rose by 7%, marking its best day in years. In Germany, media reports suggest that centrist parties are discussing the creation of two special fiscal funds, totaling at least €200 billion ($208 billion), to bypass constitutional debt limits and bolster defense capabilities. Estimates indicate that Germany may require €400 billion in defense investment and €500 billion in public infrastructure spending. A summit in London, attended by U.K. Prime Minister Keir Starmer and French President Emmanuel Macron, further reinforced commitments to increased defense spending among European nations. Robin Winkler, Deutsche Bank’s chief German economist, highlighted that the upper range of the proposed German funds could equate to 2% of GDP — similar to the investments made in East Germany following reunification. JPMorgan analysts predict that by 2026, leading European defense companies — BAE, Thales, Leonardo, and Rheinmetall — could be trading at 20 times earnings, up from the current 16 times. They anticipate NATO’s European members will raise defense spending to at least 2.5% of GDP, with approximately 40% directed towards equipment development, procurement, and maintenance. “As budgets expand, the proportion allocated to equipment typically rises,” the analysts noted, adding that European defense stocks companies are likely to secure a larger share of contracts. Despite the positive outlook, the analysts cautioned that immediate revenue and earnings upgrades might be delayed as budget approvals and contract negotiations take time. John PaulJohn Paul is the founder of DayTradeToWin, a trading education and software company established in 2008, supporting traders worldwide. His expertise focuses on price action-based futures trading strategies and structured market analysis. DayTradeToWin delivers trading education, indicators, and software tools designed to help traders apply disciplined, rule-based decision-making across global futures markets. He is the creator of multiple trading methodologies, including the Sonic System, Atlas Line, and Trade Scalper, which help traders identify structured opportunities in markets such as the E-mini S&P 500 (ES), Nasdaq (NQ), crude oil (CL), and gold (GC). Official website: https://daytradetowin.com daytradetowin.com

Nvidia Corp. is set to report earnings on Wednesday, and investors are eagerly watching for signs of momentum. The stock has been mostly flat since June, despite bouts of volatility. Will this report be the catalyst for a breakout, or will lingering concerns keep investors on edge? Bullish Sentiment: A Rally Waiting to Happen? Mizuho analyst Jordan Klein sees a potential surge ahead, noting that “a lot of money on the sidelines” could rush in if Nvidia (NVDA -3.09%) delivers strong results. He expects the stock to move “higher before lower” following its recent stagnation. A key reason for his optimism? Demand for Nvidia’s new Blackwell lineup is significantly outpacing supply. With production ramping up in the second half of the year, Klein believes Nvidia is well-positioned for continued growth. Concerns Loom: DeepSeek and Microsoft Uncertainty Despite the bullish outlook, some investors remain cautious. One source of concern is Chinese AI firm DeepSeek, which has sparked debate over whether future AI development will require less hardware—potentially impacting Nvidia’s long-term dominance. Another worry stems from Microsoft (MSFT -1.03%), which reportedly canceled some data-center leases. While this has added to market jitters, Mizuho’s Vikram Malhotra suggests it may simply be a “course correction” rather than a sign of reduced AI infrastructure investment. Skepticism Persists: No Immediate Catalyst? Stifel analyst Ruben Roy believes Nvidia’s earnings may not be the game-changer some investors hope for. With market uncertainty still lingering post-DeepSeek, he doubts earnings alone will drive a strong upside move. The Bigger AI Picture: A Long-Term Win for Nvidia? Melius Research’s Ben Reitzes takes a broader view, arguing that demand for AI chips is already being validated. Tech giants are in an arms race to dominate AI, and Nvidia stands to benefit from this relentless spending. Reitzes likens Nvidia’s hardware to Ferraris—elite, high-performance chips that companies like Elon Musk’s xAI highly value. Despite the short-term noise, he believes Nvidia will remain the go-to choice as AI workloads continue to grow. Bottom Line: Make-or-Break Moment for Nvidia? With earnings approaching, Nvidia finds itself at a crossroads. Will strong demand fuel a stock rally, or will lingering concerns weigh on investor sentiment? Either way, Nvidia’s role in the AI revolution is far from over. John PaulJohn Paul is the founder of DayTradeToWin, a trading education and software company established in 2008, supporting traders worldwide. His expertise focuses on price action-based futures trading strategies and structured market analysis. DayTradeToWin delivers trading education, indicators, and software tools designed to help traders apply disciplined, rule-based decision-making across global futures markets. He is the creator of multiple trading methodologies, including the Sonic System, Atlas Line, and Trade Scalper, which help traders identify structured opportunities in markets such as the E-mini S&P 500 (ES), Nasdaq (NQ), crude oil (CL), and gold (GC). Official website: https://daytradetowin.com daytradetowin.com

Interest-Rate Volatility Normalizing, Says J.P. Morgan’s Phil Camporeale Investors are showing less concern about rising interest rates, though key market risks remain. “The biggest risk is inflation making a comeback in the second half of this year,” said Phil Camporeale, portfolio manager for J.P. Morgan Asset Management’s global allocation strategy. He warned that inflation could not only remain persistent but also accelerate due to wage growth or rising prices in sectors like lodging and dining. On Friday, U.S. stocks fell sharply, with the Dow Jones Industrial Average experiencing its worst week since October. Investors analyzed economic data, including a consumer survey indicating heightened inflation expectations driven by tariff concerns. The upcoming week brings fresh inflation data from the Federal Reserve’s preferred measure, the personal-consumption expenditures (PCE) price index. Recently, stock markets have found relief as rate volatility has eased to levels last seen in early 2022—before the Fed’s aggressive rate hikes began. “Nothing worries equity investors more than interest-rate volatility,” Camporeale noted. However, with inflation slowing, prompting the Fed to adjust its monetary policy with rate cuts last year, rate volatility appears to be stabilizing. So far in 2025, the Fed has maintained its benchmark rate, pausing rate cuts in January. “The Fed is on the back burner now,” said Camporeale. “Nobody is calling for immediate action.” Investor focus has shifted from the Fed’s next move to fundamental drivers of the equity markets. Markets seem to accept inflation running slightly above the Fed’s 2% target, but investors remain cautious. The University of Michigan’s latest survey indicated that tariff-related developments have heightened inflation concerns. “Consumers are bracing for a resurgence in inflation,” said Joanne Hsu, director of the survey. “If these concerns persist, they could pose challenges for policymakers.” Investors will closely watch the Fed’s favored PCE gauge, due on February 28. Some analysts believe the Fed may now opt for an extended wait-and-see approach. “Bond-market volatility is no longer the key issue,” said Sameer Samana, head of global equities and real assets at Wells Fargo Investment Institute. He pointed to the ICE BofAML MOVE Index, a measure of bond-market volatility, which has dropped to its lowest level in three years despite a brief uptick on Friday. Over the past six months, the MOVE Index has declined nearly 18%. Despite last week’s market decline, the S&P 500 remains close to its all-time high from February 19, closing Friday at 6,013.13—just 2.1% below its record. The current bull market has broadened beyond technology stocks, with financials playing a key role. While the S&P 500’s technology sector has dipped 0.3% year-to-date, financials have gained 4.8%, according to FactSet data. Investors will also watch Nvidia’s quarterly earnings report on February 26. “It’s a significant shift from a market dominated by tech to one where financials and other sectors are driving gains,” said Samana. Equity Risk Premium at Historic Lows The U.S. stock market’s equity risk premium has fallen to multidecade lows, according to a Wells Fargo Investment Institute report. “Stocks aren’t as attractive as they were last year,” said Samana. However, he still sees the S&P 500 as more appealing than bonds, especially with the 10-year Treasury yield hovering around 4.5%. On Friday, the yield on the 10-year Treasury note fell 8 basis points to 4.419%, its lowest level since mid-December. “There’s little incentive to buy a 10-year Treasury when a money-markets fund offers a similar yield without duration risk,” said Camporeale. Camporeale remains overweight on equities, favoring U.S. stocks. He has reduced exposure to core bonds, including Treasurys, in favor of high-yield corporate credit and equities. Following the U.S. presidential election in November, he added value and midcap stocks to his portfolio. Looking ahead, he anticipates “low-double-digit returns” for the S&P 500 this year. John PaulJohn Paul is the founder of DayTradeToWin, a trading education and software company established in 2008, supporting traders worldwide. His expertise focuses on price action-based futures trading strategies and structured market analysis. DayTradeToWin delivers trading education, indicators, and software tools designed to help traders apply disciplined, rule-based decision-making across global futures markets. He is the creator of multiple trading methodologies, including the Sonic System, Atlas Line, and Trade Scalper, which help traders identify structured opportunities in markets such as the E-mini S&P 500 (ES), Nasdaq (NQ), crude oil (CL), and gold (GC). Official website: https://daytradetowin.com daytradetowin.com