Three point two percent growth. Three point six percent unemployment, the lowest since 1969 -- except this time without inflation. Fed on hold. Popularity very high among his base. No clear or, arguably, viable candidate -- at least in his eyes. Why not shut down the Chinese? So far it hasn't hurt us. Maybe it won't, ever.
There are so many apologists for the Chinese out there, so many pundits who keep saying we have no leverage. They will ignore that the Chinese averages went down 5% and 7%, respectively, the latter being the equivalent of the Nasdaq. No sooner did Trump tweet that the tariffs are going up, than did I read and hear that China is going to play the long game with us -- and therefore we have to lose.
To which I say, what long game? Is there something in their debt-ridden, bond-besotted world that makes them feel secure, even as they are going to lose their biggest market to others who won't have tariffs?
We know that most of the parts and clothes and even motors they make can be made elsewhere. It's really the shipping issues that have bedevilled us -- infrastructure for gigantic containerships just isn't ready in most countries. China excels in it. So, factories can be built fast and inexpensively with a cheaper workforce, but trains and docks elude them. The size of these tariffs, though, would make it so the infrastructure will be developed -- but it is hard to imagine anything being built to rival the Chinese within the next few years, at least.
What I want to make clear is that if you have raised some cash -- I think it might already be too late to sell except for the so-called "Chinese stocks" that I reference over and over again, much more in your Action Alerts Plus bulletins to come -- it is a little too early to buy.
Now as usual, the ETFs, including the S&P 500 (SPY) , are the blunt instruments that rain hell on all stocks. And as usual, the stocks that bounce back first are the tech stocks with little Chinese exposure and the consumer packaged goods that just demonstrated good numbers. Secondarily, the fintech stocks come right back, leaving the actual banks in the dust.
Last but not least, because they have so much weight in the S&P even as they have the least exposure to China: Facebook (FB) , Amazon (AMZN) and Netflix (NFLX) . Notice you can't "do" Alphabet (GOOGL) , because their quarter was terrible relative to their own quarters -- not versus others, but so what, in this world we live in.
What's the best strategy? Given that Trump can undo what he just did, you have to buy something.
But not everything, in case he doubles down or the Chinese cancel their trip. That would be the second tranche.
Now if you scan the universe, you are going to come back first with Amazon and Facebook, because both will not have any momentum stolen from them and are really being pulled down by the futures and the fear of a slowdown. If they are down a lot, you take out a lot of risk.
Next would be the companies that are frustrated about not being in China anyway: Mastercard (MA) and Visa (V) are the best there. Paypal (PYPL) down seven or eight would be a gift.
Under no circumstances can you buy the banks, because they trade down off of international weakness. They shouldn't. They should be a natural place to go, especially the domestics like PNC PNC Financial (PNC) or US Trust. Nevertheless, they are all ETF'd -- there is no difference and they are despised on days like today and tomorrow.
Tech's difficult. We were really in 5G heaven last week, and now that's blown up. We were also revelling in the comeback of Advanced Micro Devices (AMD) -- which, I think, is legit and actually a good place to go.
If you are insisting on tech, the cloud kings are the hottest stocks around and you might want to go in this order: VMWare (VMW) , Splunk (cyber security angle is solid) (SPLK) , ServiceNow (NOW) , Adobe (ADBE) , Salesforce.com (CRM) and Workday (WDAY) . You always have to be careful what's been bundled here by the ETFs -- and remember that the ETF short-sellers might bang all of these down, because they are so highly valued. But buying one, at least, is a must if you have no exposure.
I also think, despite the headlines, you can start health care with some winners of late, namely Bristol-Myers Squibb (BMY) and Merck (MCK) . I would include Johnson & Johnson (JNJ) , but there's a lot of litigation risk.
We didn't have a lot of consumer packaged goods stocks that were any good. Pepsico (PEP) , Mondelez (MDLZ) and Hershey (HSY) all make sense. So does the rejuvenated General Mills (GIS) . P&G (PG) is, incredibly, irresistible. As is Colgate-Palmolive (CL) . Buy on any dip.
Now let's talk dicey: There will be sellers all over the place with Pinterest and Zoom. I think day one is too early to buy them, because some of the selling may be to raise money for the now ill-timed Uber deal. You have to wait.
How about the industrials that have been so strong? They will not be distinguished and they will all be clubbed. Opportunity? Yes, but not day one because they are at ground zero and you don't buy ground zero today.
Particularly vulnerable? Boeing (BA) -- especially with this parade of horrible news -- Caterpillar (CAT) , which has been struggling anyway, Emerson Electric (EMR) , which is due to report tomorrow, United Technologies (UTX) as well as the hapless Dow Chemical (DOW) and DowDupont (DWDP) . Those two are truly red headed step child sinners.
Oils? No.
Domestics? You have to go with companies like Yum (YUM) and Darden Restaurants (DRI) , both of which work -- and the former just had a terrific report met with unjustified selling. Risk takers? You were born to buy Chipotle Mexican Grill (CMG) today.
How about Nike (NKE) ? People didn't like the quarter, so wait until $82. But you know what can't be waited for? You probably have to buy your first tranche of Lululemon (LULU) , that is if it is down at all.
Finally, the rails trade down on trade. Then they go up on numbers. Union Pacific (UNP) , as always, is the biggest risk because of all of the Chinese exposure. Buy it only if Norfolk Southern (NSC) and CSX (CSX) refuse to go down. Avoid all other transports, even if oil comes down, because they are in purgatory from their last quarters and travel is a no-no on a Chinese related selloff.
There's your gameplan. Much more for club members of Action Alerts Plus -- including new names. See you there and on our call at 11:30 a.m. ET Thursday.
