Global markets are under some duress…but for now, the action should not cause you to change your thesis. While markets are facing legitimate headwinds, it’s important to realize that stocks are under duress in what feels like a “shoot first, ask questions later” reaction, advises Kenny Polcari, chief market strategist at SlateStone Wealth.
Fears of what might happen in the economy, not what is actually occurring, is causing the algos and trader types to hit the SELL button. Point being, if policy decisions and an economic slowdown aren’t as bad as currently feared, it could cause a substantial market rebound in the coming weeks and months.
Starting with the trade and tariff policy that was announced: There needs to be a clear and concise communication strategy from the administration regarding the policy goals of these tariffs and what the responses will be depending on the global response of our trading partners. That is KEY.
What is the response? So far, we have seen a number of nations signal their intent to engage - the EU, Canada, the UK, Mexico, India, Israel, and Australia have all reached out.
Turning to economic growth, while fears of a slowdown surged in the first quarter, economic data stayed mostly resilient. Jobless claims remained subdued, measures of manufacturing and service activity showed continued expansion, and the unemployment rate remained historically low, close to 4.1%.
Put simply, there was little in the actual data in Q1 to imply the economy is weakening. If economic data stays solid throughout the second quarter, it will push back on those recession fears and could help fuel a rebound in the markets.
On days like this, it is always better to sit back and let it play out. Typically, it is a three-day waiting period to see where markets go. Our portfolios are designed to weather the storm and should not be re-modeled based on one day's reaction.
That being said, when good quality stocks get sold in order to raise cash, it causes them to become mispriced. That creates a longer-term opportunity. At times like this, I am looking at the best names in different sectors. Procter & Gamble Co. (PG), Johnson & Johnson (JNJ), and Microsoft Corp. (MSFT) are just a few examples of where to look.
