The Primary Goal for Investors Now as Tariff Reality Wallops Market
Let's survey the damage — and plan our next steps — after it became clear that tariffs will not be avoided.
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Hopes were high on Monday morning as talk about a national cryptocurrency strategic reserve sent Bitcoin IBIT up more than 10% from the market close on Friday. However, it didn’t last long. Worries about economic growth and tariffs took hold again, and the selling accelerated when President Trump confirmed that tariffs on Mexico and Canada would begin Tuesday and additional tariffs would be imposed on China.
Many market players were hoping that a last-minute deal would avert the tariffs, but it didn’t happen, and the selling was broad and consistent. At the closing bell, there were more than three losing stocks for each gainer, and new 12-month lows expanded to over 700 names.
The Russell 2000 IWM was pounded for a loss of 2.8%, but the Magnificent Seven MAGS fared even worse with a hit of 3.4%. The mighty Nvidia NVDA was the biggest loser in the Nasdaq 100 QQQ, with a decline of 8.8%.
To add to the assault, OPEC announced that it will be ramping up oil supplies, and that sent the oil services ETF OIH down 5.3%.
This extremely poor action is driven by one thing — uncertainty. The impact of tariffs and whether they will even be imposed has been hanging over the market, but Monday it become clear that they will not be avoided, but the ultimate fallout is still a major mystery.
On top of the tariffs, there are growing signs of an economic slowdown and sticky inflation. The market has lost the leadership of the AI theme and there is no clear replacement in sight. Hope for rotational action has been dashed as small-caps move back to the same levels they hit in early 2022.
The good news is that many stocks with great fundamentals are being dumped along with everything else. When indexes and index ETFs are sold, then every stock in those indexes is sold as well without regard to their individual merit.
When the market is correcting like this, the indexes drive the action, but eventually, when it starts to recover, individual stock picking will reward astute stock pickers. For now, the primary goal is to protect capital and to be in position for some of the great opportunities that are developing.
Have a great evening. I’ll see you Tuesday.
At the time of publication, Rev Shark had no positions in any securities mentioned.
