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Our View

From Goldman Sachs

Will tariffs lead to a recession?

The Trump administration’s tariffs have upended decades of US trade policy, sparking a rapid reassessment of the economic outlook in the US and beyond. Goldman Sachs Research’s Top of Mind report examines what lies ahead for the US economy amid this radical shift in trade policy.

Paul Krugman, the Nobel-winning economist, explains that the size and speed of the rise in tariff rates makes this “the biggest trade shock in history.” But he’s more concerned about the uncertainty created by the trade policy shift than the scale of the shift itself when it comes to US recession risk. Even high tariffs don’t normally cause recessions, he says, but unpredictable tariffs that leave businesses hesitant to make long-term investment decisions very well might. As a result, Krugman says “a recession seems likely,” and argues that policy reversals may actually hurt rather than help, given that the reversals themselves may be reversed at a moment’s notice, which only increases uncertainty.

Jan Hatzius, Goldman Sachs Research’s chief economist, also expects a sizable tariff-induced hit to US GDP growth owing to reduced business investment, the tax-like effect of tariff increases on real income and consumer spending, and tighter financial conditions as markets price a dimmer outlook. He forecasts low US growth and a 45% chance of recession within the next year, assuming the full slate of the “Liberation Day” tariffs won’t take effect. Goldman Sachs Research would probably shift to a recession call, he says, if they do take effect. That said, Hatzius is more optimistic than Krugman that a policy reversal could stabilize near-term conditions.

Oren Cass, founder of American Compass, argues that although the Trump administration’s goal of reordering the global trade system will entail some short-term costs, “there is no reason the trade policies the administration is pursuing would need to cause a recession.” In his view, while the abruptness and lack of communication around the implementation of the shifts in tariff policy were understandably frustrating, the administration has already taken helpful steps to course correct, which should continue to resolve any uncertainty. And, Cass says, companies already have enough information about the administration’s tariff goals to work out the right strategy: Invest significantly more in US-based production.

MiM and Daily Recap

Thursday’s ES session began with upward momentum in the premarket, lifting off the Globex low of 5386.50 at 8:24 AM. A steady rise followed into the open, peaking at 5414.00 by 9:30 AM, up 27.00 handles or 0.51%. A modest pullback to 5399.50 at 9:36 AM (-13.50 / -0.25%) set a higher low, which was quickly followed by a strong rally to 5482.50 at 11:12 AM—a morning high that marked an 86.00-point surge (+1.59%) from the prior dip.

After reaching that level, sellers pushed ES down to 5463.75 by 11:30 AM (-20.75 / -0.38%), but bulls resumed control, printing another high of 5484.75 at 11:54 AM. However, this only added a modest 21.00 points before another retracement to 5468.00 at 12:09 PM (-16.75 / -0.31%).

The afternoon saw rotation but maintained an upward trajectory. A push to 5504.75 at 12:57 PM (+36.75) was met by a steeper pullback to 5485.75 at 1:18 PM (-18.75 / -0.34%). After consolidating through early afternoon, ES retested the highs at 5510.25 by 2:06 PM, then faded to 5496.25 at 2:15 PM (-14.00 / -0.25%).

From there, a brief lift to 5514.75 at 3:14 PM was followed by a sharper drop to a new low at 5488.75 at 3:32 PM (-26.00 / -0.47%). Yet bulls stepped back in during the final hour, driving ES up to the session high of 5541.00 at 4:00 PM on the closing candle — marking a 52.25-point rally from the prior swing low (+0.96%).

The market settled during the cleanup session, closing at 5519.75. The final regular session close came in at 5510.50, representing a gain of 112.25 points or 2.08% from the previous day’s 5398.25 close.

Thursday’s tone was bullish throughout, with the index trending higher on strong dips being bought steadily across the day. Volume was robust, with over 1.05 million contracts exchanged during the regular session and 1.345 million for the full day.

The day’s performance was driven largely during the regular session, which outpaced the modest 13.25-point gain in Globex. Cash-to-cash change totaled +112.25 points (+2.08%), while the open-to-close move added 98.75 points (+1.82%), reflecting strong participation from the open bell.

The Market-on-Close (MOC) imbalance showed a meaningful tilt toward buyers. With $2.336B to buy and $1.006B to sell, the net buy imbalance of $1.33B pushed the dollar percentage to 69.9%—just above the ±66% threshold. However, the symbol imbalance ended at 59.1%, just under the trigger line, limiting the urgency of late-day flows. Still, the strength into the 4:00 PM peak suggests buyers had the upper hand heading into the final auction.

Overall, Thursday marked a continuation of bullish momentum with multiple higher highs and higher lows throughout the session. Closing strength and above-average volume suggest positive carryover potential into Friday’s trade.

How to read the MIM

Technical Edge

Fair Values for April 25, 2025

Daily Breadth Data 📊

For Thursday, April 24, 2025

Weekly Breadth Data 📈

Week Ending Friday, April 18, 2025

Guest Posts:

Get instant access to our partners’ real-time market data and insights not available anywhere else. Here is last night’s Founder’s note getting you ready for today’s market and explaining the constraints in yesterday’s market. – MrTopStep

Founder’s Note:

Futures are -10bps after yesterday’s strong rally.

GOOGL +5% after earnings to 167

All the chatter yesterday was “Is the selling really over???”

Its not hard to understand why nearly all investors are bearish given the US political stance of imposing tariffs and informing us that the US economy may hit a “speed bump”. Put all that macro aside for a moment…

From an options perspective, for the US equity rally to lose steam we need to see options-induced resistance (gamma) and/or signs that options prices are shifting towards a bearish tone (vol/skew).

Looking at the SPX gamma landscape via TRACE we see the massive +25k Captain Condor at 5,545 above & 5410 below (see last nights note on CC) – but thats 0DTE. Outside of that is, quite frankly, nothing.

Our thesis has been dealer positive gamma would fill in on sharp market rallies, and this morning we just don’t see that. There is also little to the downside, until we get to 4,800 wherein large positive gamma puts still exist. Through this lens, past today’s big condor strikes (which we look to play as targets for today) there is no real edge to extract from this positioning.

If you look at SPY gamma positioning, its quite large, and very negative. As you can see from the SGOI curve below, peak negative gamma is at 545, and that negative gamma pressure tails off into SPY 475 to the downside, and not until ~600 to the upside. Thats not bullish or bearish – it is conducive to fluid price action through to and above what we’ve called “no mans land”: the 500->580 range.

What about vol?

Starting with skew, we’ve compared 1-month skew from last week (gray) to today (teal). Last week was the most recent time the SPX neared the 5,500 area (into VIX exp/OPEX).

What is interesting is the put skew has declined at exactly the area wherein we mark large dealer positive gamma (~4800), and we now see a small lift to call skew >=5,600, which reads like a relative call bid.

This is a bullish development, signaling the repricing of upside vs downside.

But here is where things hit a snag…

>=1week ATM IV for the SPX is ~25%, with the VIX at 27, and SPX 5-10 day realized vol in the 25% area. This tells us that implied vols are too cheap, because IV/VIX at 25-27 is simply matching the amount of movement the SPX has been experiencing. This doesn’t account for any unknown related to a policy tweet, upcoming data points (earnings, NFP, ISM, etc). In order to justify lower IV in the future, you would generally need to see a removal of the known unknown (tariffs).

Its possible the market is sniffing out some deals, and that is leading to the decline in volatility. But the risk with this low IV is that if a bad tweet or headline fires across the wires, then IV’s have to “untwist” as call IV would decline and put IV rises. This downside would occur into the SPX flat/SPY negative gamma construct, which would allow/provide a sharp downside move (3-5%).

So, whats the trade?

We do not want to be short stock/delta here, because there quite frankly is no reason to be. If anything the strong equity options flow last night, combined with the call skew bid is a win for bulls.

That being said we think buying ~1-month puts and or put spreads makes a ton of sense given the lower prices, and the SPX rally into what has been a strong resistance zone (5,450) and the cheapening vol. This is a “great risk reward” trade as opposed to “the market has to crash from here” type view.

If you want to play further price upside, we can’t fault that, but you have to be weary of the fact that call skew will likely contract into further rallies. Given that, we recommend call spreads vs long calls. To be clear, we remain short of +1 month OTM calls from Wednesday’s big market rally. If/when traders start selling puts into near-the-money SPX prices (i.e. supplying positive gamma), then we would start to add long stock/delta to our portfolio.

Get instant access to our partners real-time market data and insights not available anywhere else. Here is last night Founder’s note getting you ready for today’s market and explaining the constraints in yesterday’s market. – MrTopStep

Trading Room News:

Polaris Trading Group Summary – Thursday, April 24, 2025

Yesterday was a textbook bullish trend day in the PTG Room, with a game plan that played out nearly to perfection, guided by David Dube’s premarket DTS briefing and sharp intraday commentary.

Market Context & Opening

Trade Highlights & Key Levels

Afternoon Session & EOD

Lessons & Takeaways

DTG Room Preview – Friday, April 25, 2025

Calendars

Economic Calendar Today

This Week’s High Importance

Earnings:

Full Calendars

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Disclaimer: Charts and analysis are for discussion and education purposes only. I am not a financial advisor, do not give financial advice and am not recommending the buying or selling of any security.

Remember: Not all setups will trigger. Not all setups will be profitable. Not all setups should be taken. These are simply the setups that I have put together for years on my own and what I watch as part of my own “game plan” coming into each day. Good luck!!

Follow @MrTopStep on Twitter and please share if you find our work valuable!

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Our View

Over-investment in the top 7 to 10 stocks, the Fed cutting rates while inflation was going up, the U.S. deficit at $36.7 trillion, lower consumer confidence and spending, slower growth, recession fears, earnings growth at risk as tariffs raise costs and erode margins, a softening labor market, geopolitical clashes, and last but not least, President Trump’s unending tariffs. These problems have created an environment of uncertainty and a big jump in the CBOE’s fear gauge, the VIX, which traded all the way up to 30.02. The last time it was this high was August 5, 2024.

The index markets had their steepest declines since 2020 and wiped out $2.7 trillion in market cap. The Dow dropped 1,679 points or 4%, and the tech-heavy Nasdaq—which powered the market higher for years—was down 6%, pulled lower by big declines in $NVDA, $AAPL, and $AMZN. The S&P 500 fell 4.8%, and the other benchmarks suffered their sharpest declines since the early days of the Covid-19 pandemic.

There are thousands of ways to get fooled by the ES and NQ when they start going up, it’s human nature, but the down move sees no bounds. I know there are a lot of really good newsletters out there, some even give “tips.” That is not how this works. First, I try to provide a newsletter that supplies a feel of the markets. Sometimes it’s a few sentences, and other times it’s just a straight look at what’s going on.

Today is the March jobs report, and it could be a pivotal day. Let me explain. In the MrTopStep Trading Rules 101 (https://mrtopstep.com/trading-101/), there are some rules that still work. If you scroll down, you’ll see one called Counter Trend Friday.

Counter-Trend Friday: Over the years, this trade works best on monthly NFP jobs Fridays when the S&P futures gap sharply higher or lower on oversized pre-market Globex volumes of 400k+ ES contracts before the 8:30 am CT open. This is a fade, “the bus is too full” type of trade.

Example: The S&P is down 15 handles at 6:00 am and then down another 20–30 or more handles after the jobs number is released. Now, the S&P is down sharply at the 9:30 am open. With 400k+ minis traded before the open, this tells us that traders have already voted (sold). Depending on the price action, the idea is to buy a sharply lower open or allow the first drop after the gap down. The idea behind this is that with so many minis traded and it being a Friday—and knowing most traders can’t hold the futures over the weekend—they put in buy stops, and the algorithms go right for the buy stops. With all the selling used up pre-open, the ES will start to short cover into the buy stops that lift the offer side of a buy program.

I revised one part of the rule: you buy the lower open or the first drop below the gap down. This would also work in reverse for a big gap up. My gut tells me it’s “FRYday” today, and with the E-mini S&P 500 (ES) falling from its Wednesday high of 5,771 to last night’s early Globex low of 5,407.50—a drop of 364 points in just over 26 hours—the pace is stunning. Yesterday’s breakdown opened the door to 5,300–5,400, yet I didn’t expect it to happen this fast. The decline is accelerating.

Meanwhile, the dollar suffered its sharpest drop since 2023. When asked about the decline, Trump said, “I think it’s going very well; the markets are going to boom.” Oil plunged 6%, and gold fell 1.5% early in the day to $3,087 before rallying $72 from its low, climbing back to $3,140.00.

MiM and Daily Recap

The S&P 500 futures (ES) endured a volatile and directional session Thursday, closing markedly lower with consistent selling pressure across the day. The market opened the regular session at 5512.00 and briefly pushed to an early high of 5540.50 at 9:33 AM. This initial strength added 49.25 points from the 9:00 low of 5491.25, but it marked the session’s highest print.

A sharp reversal followed, driving ES down to 5455.00 by 11:06 AM, the morning’s deepest pullback, registering a 1.54% drop from the early high. Buyers briefly regained control through midday, carrying prices to a lower high of 5524.50 at 12:30 PM—an impressive 69.50-point rebound.

That midday strength was again met with selling. A lower high of 5498.00 printed by 1:45 PM, followed by a sharp move down to 5458.00 at 2:30 PM, and a minor lower high at 5483.50 at 2:48 PM. Late-session selling intensified, with the market cascading into a final low of 5415.25 at 4:30 PM, capping a 68.25-point slide from the prior swing high and a full-session loss of 2.33%.

From session to session, ES declined 274.00 points from Wednesday’s cash close of 5695.00 to Thursday’s 5436.00 cash close, a 4.80% drop. The regular session also saw a steep 76.00-point fall from the open to the 4:00 PM close. Volume was robust, with over 1.7 million contracts traded during regular hours and 2.34 million total on the day.

Thursday’s tone leaned decisively bearish, marked by a steady sequence of lower highs and lower lows, and capped by a powerful end-of-day liquidation move. The inability of the midday rally to break above the early high confirmed sellers’ control throughout the day.

The Market-on-Close (MOC) imbalance was notable, with $1.267 billion to buy and a strong dollar imbalance of 75.8% to the buy side. Despite this, the late-session rally failed to materialize. Symbol imbalance reached only 59.8%, below the 66% threshold for a decisive directional read. This suggests that while there was a buy imbalance in dollar terms, it was not broad-based across symbols, and thus didn’t shift the market’s downward momentum.

How to read the MIM

Technical Edge

Fair Values for April 4, 2025

Daily Breadth Data 📊

For Thursday, April 3, 2025

Weekly Breadth Data 📈

Week Ending Friday, March 28, 2025

Guest Posts:

Get instant access to our partners’ real-time market data and insights not available anywhere else. Here is last night’s Founder’s note getting you ready for today’s market and explaining the constraints in yesterday’s market. – MrTopStep

Founder’s Note:

Futures are -2% after China announced tariff retaliation.

HIRO is showing unusually large pre-market/overnight put buying, as shown below. Anecdotally we cannot recall seeing -$650mm of prem-market S&P500 deltas (HIRO signal).

Yesterday AM we were flagging 5,400 as major support, and that served to provide a ~1.2% bounce. However, as noted last night, the positive gamma support at 5,400 deteriorated greatly on that bounce (dealers lost positive gamma), and HIRO signaled longer dated put buying from 2PM – 4PM ET.

Our partners at SpotGamma introduced two new products this week during a webinar. You watch that webinar here:

And take advantage of their 50% off an annual subscription here:

Get instant access to our partners real-time market data and insights not available anywhere else. Here is last night Founder’s note getting you ready for today’s market and explaining the constraints in yesterday’s market. – MrTopStep

Trading Room News:

Polaris Trading Group Summary – Thursday, April 3, 2025

Today’s trading session in the PTG room, led by PTGDavid, was marked by a steady downtrend and persistent bearish pressure, culminating in what David humorously referred to as an “Ass-Whooping” — a technical term coined for days with index drops exceeding 3%.

Early Session Highlights:

Midday Action:

 Afternoon Breakdown:

 Lessons & Takeaways:

 Notable Quotes & Moments:

Overall, it was a challenging but educational day with successful early shorts, clear intraday structure analysis, and reinforcement of patience when bulls show no strength. Great work by the team keeping it light in a heavy market!

Let me know if you’d like charts or key price levels highlighted!

DTG Room Preview – Friday, April 4, 2025