A month ago market players were debating the wisdom of the old market adage "sell in May and go away."
It hadn't worked well in recent years, but it was extremely timely advice this time, with the S&P 500 down over 6% and the Nasdaq dropping nearly 8% during the month.
The China-U.S. trade struggle has been the main problem, but concerns have grown in recent weeks about a slowing economy.
Bonds have exploded higher, and interest rates have collapsed, as funds have moved into the safety of fixed income. The 20+ Year T-Bill Fund (TLT) is now at the highest level since late 2016, and the odds of a Federal Reserve interest rate cut are ramping up.
The market already had its hands full with a nasty negative narrative and deteriorating technical conditions when it was blindsided, with President Trump announcing plans to impose tariffs on Mexico unless our southern neighbor takes action to stop the flood of immigrants to the border.
The market took the news very poorly as it struggled to figure out the full ramifications of such a move.
The Mexican foreign minister is already on his way to Washington to start negotiations. I would not be surprised to hear news before the open on Monday that progress is being made. Ultimately I will be surprised if the tariffs ever go into effect, but the market doesn't like this sort of uncertainty.
For a month now I have been writing about raising cash, playing defense, and staying patient while this downtrend is in force.
Nothing changed Friday, but the Mexican tariff issue may actually help to hasten the corrective process.
I don't know how long this downtrend will last, but I'm looking forward to the opportunities that await.
Have a great weekend. I'll see you on Monday.