Potential Trump Tariff Retaliation Pressures Market, Hits This Holding
Details will matter but, for now, our inverse ETF positions are doing their job.
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Stocks have turned around following two Friday morning developments that included the potential for President Trump to announce reciprocal tariffs by the end of the day.
Word is that this would fulfill a Trump campaign promise to impose tariffs on American imports equal to the rates that trading partners impose on American exports. As of now, there isn’t much more to go on and it’s not clear which countries would be affected or the size of these tariffs. In other words, uncertainty is back in a market that was already flashing "fear" per the Fear & Greed Index.
When China slapped reciprocal tariffs on the U.S. earlier this week, Trump did not immediately respond, but our view was it was only going to be a matter of time. That’s why we kept the newly-instilled inverse ETF positions in play rather than dial the Portfolio’s exposure once we learned tariffs on Mexico and Canada were delayed. Addressing this uncertainty is exactly why we called them back into the Portfolio, and today they are doing their intended job for us.
As more details become known, we’ll be in a better position to assess their impact on the economy and impacted sectors.
The second item weighing on the market is the jump in year-ahead consumer inflation expectations found in the University of Michigan Consumer Survey. For February, the preliminary figure jumped to 4.3%, a big move from 3.3% in January and December’s 2.8% figure. This likely reflects some of the headlines regarding higher prices that we’ve shared previously as well as concern for Trump tariffs. The Fed isn’t going to like what it sees in this data, and that is what the market sees.
The hardest holding being hit is Marvell MRVL, which has enjoyed a considerable run, but we continue to see more ahead following capex guidance from Microsoft MSFT, Meta META, Alphabet GOOGL and, on Thursday night, Amazon AMZN. Indications for the expected rebound in its carrier infrastructure and enterprise networking segments are also encouraging. For now, we’ll look to see if MRVL shares hold the 50-day moving average at $111.91 and keep an eye on other levels of support.
More Pro Portfolio
- We're Adding Back These Two ETFs to the Portfolio Amid Uncertainty
- Monthly Roundup: Starting 2025 Off Strong as Potential Tariffs Add Uncertainty
- Charting the Markets: S&P 500 Looks to Be Running Out of Steam
At the time of publication, TheStreet Pro Portfolio was long MRVL, MSFT, META, GOOGL and AMZN.
