Trading update: 9 April 2026

While buying signals are flashing for US equities, investors will need to navigate an economy increasingly under threat from inflation and the potential for stagflation – a  challenging economic cycle defined by the combination of stagnant economic growth, high unemployment, and high inflation. For those still not sold on the US turnaround story, emerging markets (ex-China) are luring back investors following heavy selloffs in recent weeks.  

Calm returning?

The Cboe Volatility Index, or VIX, a gauge of expected stock-market turbulence over the next month, tumbled after President Trump agreed to a temporary ceasefire in his war against Iran. Bloomberg reports that the VIX slid 5.6 points to 20.18, the lowest since February 27, before the US started its attacks on Iran.

Buy the bottom

According to Morgan Stanley, US stocks may be bottoming out. If that is the case, it would be an ideal opportunity to start adding exposure – the investment bank favours cyclical sectors and high-quality growth names. Strategists quoted by Bloomberg wrote: “We believe the S&P 500 (VOO-NASQ) is carving out a low and think it makes sense to start adding length in cyclical and quality growth trades where earnings remain strong, valuation has compressed, and sentiment is negative. Their top picks include financials, discretionary goods and hyperscaler tech companies.

Equity-buying mode on

According to the Goldman Sachs trading desk, systematic investors – those that rely on a rules-based, quantitative approach to investing built on data-driven models, algorithms, and technology, rather than discretionary human judgment – are poised to flip back into equity-buying mode after slashing their exposure to multi-year lows during the recent market selloff. According to Bloomberg, the so-called fast-money cohort, which includes commodity trading advisers and volatility-targeting strategies, dumped roughly $240 billion of global stocks over the past month as markets tumbled, quoting stats from a Goldman Sachs note to clients. That wave of selling appears to be drying up: The bank’s traders estimate the group could be net buyers of around $55 billion over the next month, including roughly $20 billion in US equities.

Covering the short

Hedge funds are rushing to close out bets against US stocks at a pace not seen since the market rebounded from the crash set off by the pandemic in March 2020. Shared in a Bloomberg article, the Goldman Sachs trading desk division reported that hedge fund managers sharply accelerated the covering of short positions tied to macro products, like major indexes and exchange-traded funds (ETFs), after President Trump announced a temporary ceasefire deal in his war against Iran. The bank said the volume of such unwinding is on track to reach the levels seen early in the pandemic.

Stagflation signals

The US service economy expanded in March at a slower pace, as employment shrank by the most since 2023, and input prices accelerated sharply, according to Bloomberg. The Institute for Supply Management’s gauge of prices paid for services and materials jumped to 70.7 – the highest since October 2022. The 7.7-point increase from the previous month was the largest in nearly 14 years, comparable to the change seen in the group’s manufacturing survey. The massive jump in the prices paid index suggests that inflation is sticky and aggressive. The ISM services index fell 2.1 points to 54, dragged down by weaker employment and less growth in business activity. And when prices go up while growth and hiring slow, stagflation fears start to emerge. Should this scenario continue, corporate profit margins will get squeezed as companies cannot easily pass rising input costs to customers due to dwindling demand. In this situation, investors should look to invest in companies with pricing power – those that can raise prices without losing customers, like those in healthcare or essential consumer goods.

Fuelling inflation

Skyrocketing fuel prices due to the Iran war are fanning the embers of transportation costs, which were already rising due to a shrinking pool of drivers in the US, reports Bloomberg. Trucking operators saw diesel prices spike by almost 50% since the start of the US-Israel war against Iran at the end of February. Hauliers have responded by raising the weekly per-mile fuel surcharge paid by shippers to its highest since 2022, according to Truckstop.com data. The filter-through effects will likely add more pressure to inflation, limiting the scope for the Fed to cut rates.

Cheers, my China!

As traders continued to flee emerging market exchange-traded funds (ETFs) for a fourth consecutive week amid fading appetite for risk, it seems that ex-China strategies are still luring buyers. Bloomberg reported that the $18 billion iShares MSCI Emerging Markets Ex-China ETF (EMXC-NASQ) attracted about $313 million in inflows for the week ended April 2. The fund also recorded its biggest monthly inflow in March since 2024, totalling $1.6 billion. The ETF is seeing new money coming in after recording a negative performance last year, stung by heavy outflows.

Coal comfort

Exxaro Resources (EXX-JSE) concluded a new long-term coal supply agreement with state-owned power utility Eskom for its Matla colliery, effective April through November 2043. The deal replaces the original 1983 agreement that expired in June 2023. Exxaro will supply about 9.3 million tons of coal annually to Matla power station, with the R5.2 billion Matla life-of-mine expansion project progressing toward completion in the first half of this year.