Market Bloodbath: Is This "The Big One"? | Lance Roberts & Adam Taggart
Apr 5, 2025
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Lance Roberts, a portfolio manager and chief investment strategist at RIA Advisors, delves into the turmoil of today's stock market, grappling with the heavy impact of new tariffs. He discusses whether this downturn signals a major correction or a potential rebound. The conversation touches on key indicators like credit spreads and revised earnings, navigating the psychological challenges of investing during volatility. Lance also offers strategies for maintaining financial security amid economic uncertainties, emphasizing the importance of proactive planning.
The current market downturn, triggered by tariff announcements, represents an event-driven correction rather than signaling a broader economic recession.
Investors are encouraged to strategically assess deeply undervalued stocks like NVIDIA and Amazon as potential opportunities amid market volatility.
Concerns about consumer credit, coupled with the expiration of protective measures, threaten future economic stability and necessitate vigilance in financial monitoring.
Deep dives
Market Rally Potential
The discussion highlights the potential for the market to rally to approximately $5,600 or $5,700, indicating a strategic exit point for reducing equity holdings. This approach suggests a cautious perspective on the current market dynamics rather than a complete divestment. Specific stocks, especially major players like NVIDIA and Amazon, are noted for becoming increasingly affordable as a result of the market downturn. This provides an opportunity for investors to evaluate their positions and consider strategic investments as valuations become more attractive.
Event-driven Corrections Explained
The current market environment is characterized as an event-driven correction, primarily influenced by recent tariff announcements rather than a broader economic recession. The tariffs enacted by the Trump administration were said to be miscalculated, resulting in unexpected outcomes that caught many off guard. The ramifications of these actions have contributed to significant declines in major indices, with the S&P and NASDAQ witnessing notable downturns. As this correction unfolds, the emphasis is placed on understanding the transient nature of such events and their potential impact on the economic landscape.
Flawed Tariff Calculation
A critical analysis reveals significant flaws in the methods used to establish tariff rates, suggesting that reliance on trade deficit as a proxy for reciprocal tariffs is misguided. The example provided indicates the absurdity of applying tariffs to areas without a practical economic impact, reflecting a lack of comprehensive strategy. Proper tariff implementation requires a more nuanced approach, focusing on specific items and industries rather than broad percentages based on trade deficits. Such miscalculations are expected to have long-term consequences on business operations and market stability.
Economic Recession Risk
The ongoing situation raises concerns about a potential economic recession, as the tariffs impose additional burdens on corporations and consumers alike. The immediate economic indicators do not suggest a recession, but there is a prevailing uncertainty about future impacts should the tariff situation persist without resolution. If businesses face rising costs without the ability to pass them to consumers, investment in growth may decline, leading to further economic challenges. Thus, while the current climate may not reflect an impending recession, the discussions highlight a pressing need for vigilance and policy reassessment.
Consumer Credit Concerns
A significant worry emerges regarding consumer credit and its potential decline as macroeconomic conditions shift. The changing financial landscape is fueled by the expiration of consumer protections, such as payment moratoriums, which may leave many vulnerable to financial distress. As delinquencies rise, lending standards are expected to tighten, further constricting consumer spending and economic activity. This cascading effect could contribute to an environment where economic sustainability becomes precarious, necessitating close monitoring of credit markets.
Strategic Investing Amidst Volatility
Navigating this unpredictable market requires careful planning and strategic adjustments to investment portfolios. As current market conditions lead to a sell signal, it highlights the importance of reducing equity risk while remaining open to opportunities presented by future rallies. Investors should focus on identifying deeply undervalued stocks and consider gradually re-entering the market during price corrections. This approach draws on historical patterns of market behavior with an understanding of the underlying economic forces at play.
Stocks got slaughtered this week in the wake of Trump's Liberation Day tariffs.The S&P is now off more than -15% from its all-time high earlier this year. The NASDAQ is down over -20% from its ATH and is officially now in a "bear market".So, is this The Big One?Will stocks continue to crash? Perhaps triggering a recession?Or, might there be reasons for a rebound after the dust settles?Portfolio manager Lance Roberts and I discuss in depth in today's Market Recap. I do my best to ask him the most pressing questions that investors most have on their minds after this scary -- and painful -- week.WORRIED ABOUT THE MARKET? SCHEDULE YOUR FREE PORTFOLIO REVIEW with Thoughtful Money's endorsed financial advisors at https://www.thoughtfulmoney.com
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