Howard: Until Trump clears up tariffs, it's a huge unknown

Key Concepts

Pension rebalancing, Mag Seven stocks, tariffs, earnings season, foreign profits, economic impact of protectionism, stock selection in a volatile market, 200-day moving average.

Pension Rebalancing and Market Bounce

• Main Point: The analyst believes pension rebalancing, specifically $41 billion in equity buying, significantly contributed to a recent market bounce.
• Details: The market sold off hard, with no buyers initially, then sharply increased throughout the day, indicating the impact of pension buying.
• Analyst's Stance: He remains cautious, suggesting the average investor hasn't returned to the market yet. His firm is holding 30% in cash.

Opportunities in the "Mag Seven"

• Main Point: Opportunities exist within the "Mag Seven" (presumably referring to major tech stocks), but patience and nimbleness are advised.
• Details: Companies like Microsoft and Google are specifically mentioned.
• Recommendation: Take profits when available, as further downside is possible.

Tariffs and Earnings Season

• Main Point: Uncertainty surrounding potential tariffs is a significant headwind, overshadowing positive earnings and a robust economy.
• Data: Q4 saw an almost 20% rise in foreign profits.
• Analyst's Concern: The lack of clarity on the size, scope, and "end game" of tariffs is hindering investment. Investors are hesitant to commit capital until the tariff situation is resolved.
• Quote: "Until Trump clears up this tariff issue...so much volatility is nobody knows what he's going to do...what's the end game?"

Contradictory Stance: Positive Outlook vs. Tariff Concerns

• Main Point: The analyst acknowledges a seemingly contradictory position: positive on earnings and the economy, but concerned about the impact of tariffs.
• Explanation: Strong earnings, ample cash on the sidelines, and high employment are positives. However, the unknown impact of tariffs is a major impediment.
• Investor Sentiment: Investors are holding cash, awaiting clarity on tariffs.
• Quote: "Earnings are good. Companies are doing great. But how are the tariffs going to affect us?"

Stock Picks: JP Morgan, Spotify, and Stride

• Main Point: JP Morgan, Spotify, and Stride are presented as quality stocks to watch, particularly in the context of market volatility.
• Recommendation: Focus on stocks that have held up well during recent selling pressure.
• Strategy: Identify stocks demonstrating relative strength as potential buys if tariff clarity emerges.

Larry Fink's Comments on Protectionism and Recession Risk

• Main Point: The analyst agrees with Larry Fink's concerns about the negative impact of protectionism on the global economy.
• Connection to Tariffs: This reinforces the analyst's concerns about the uncertainty created by potential tariffs.
• Market Signal: The market is below the 200-day moving average, indicating more sellers than buyers.
• Recommendation: Exercise extreme caution, hold a significant cash position, and await further developments.
• Actionable Advice: "Be very, very cautious. That's telling us that there's more sellers than buyers and just be patient with it."

Synthesis/Conclusion

The analyst is cautiously optimistic about the underlying strength of the economy and earnings. However, the overriding concern is the uncertainty surrounding potential tariffs and their impact on the global economy. He advises investors to be patient, hold cash, focus on quality stocks that have demonstrated resilience, and await clarity on the tariff situation before making significant investment decisions. The market's position below the 200-day moving average signals caution.