Tariff Threats Move Market…Down
For the second day in a row, U.S. – China trade issues weighed heavily on stocks, with all major indexes falling sharply on pessimism over a possible deal that would lift the threat of tariffs. Today was worse than yesterday. Yesterday, the major stock market indices made a bullish move back up after a sharp sell off at the opening bell. Not today. The Dow Jones Industrial Average (Dow) fell hard, shedding 2.3%. All 30 Dow stocks were down. The S&P 500 dropped 2.2%. What I take away as a positive (from an otherwise negative day) was the uptick in the final minutes and the support of the 200-day-moving average (the red line on the chart below)
Last, but not least of the 3 major U.S. indexes, the tech-laden Nasdaq declined 2.6%. Two things spiked, volume and volatility. Volume on the NYSE and Nasdaq both rose 21.4%. Volatility, represented by the VXX, surged over 16%! See the big up move below with the blue vertical price bar.
My policy for writing a “Market Update” is to compose and send clients my take on the market when at least two of the major U.S. stock indexes decline 3% or more in one day. That did not happen today, but it was close. Plus, the volume spike and surge in volatility are note worthy. No surprise with this market action. For one, Friday, the s S&P 500 was up 17.5% for the year, the best start to a year since 1987. The Dow was up over 14% in the first 4 months, its best since 1999, and, the Nasdaq has had its best start to a year since 1991. Secondly, expectations of trade talks with China would conclude with a positive deal as soon as this week were priced in the market. Today was what is it looks like for the market to change lanes to taking favorable trade talks out and beginning to price in the chance of a 25% tariff on $200 billion of Chinese exports by Friday.
Not all was down today in your account. BAM’s risk strategy with options and the VXX are adding value. As mentioned above, VXXwas up over 16% today. Further, ServiceMaster (SERV), a position in BAM’s Thematic Growth portfolio, jumped 9% today on solid earnings and revenue growth reported. S
Thank you for your continued trust and confidence. I remain vigilant as I manage and oversee your investment account.
Please call anytime you have a question or I may be of help. I am always happy to be of service.
Sincerely,
John