VIDEO: Our Game Plan as Trump Threats Rekindle Trade Concerns

In today’s Pro Portfolio video, Chris Versace discusses the weekend developments that have rekindled geopolitical and trade war concerns, pressuring the market as we begin a shortened trading week.

Chris explains our game plan, including what we’re looking for to put some of our cash to work, even as we recognize some of our higher beta holdings could be volatile in the near-term.

We also discuss the findings of a Morgan Stanley (MS) CIO survey that reinforce our decision to exit Qualcomm (QCOM) last week.

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At the time of publication, TheStreet Pro Portfolio was long MS.

Transcript

CHRIS VERSACE: Hey, everyone. Chris Versace here. Tuesday, January 20. Hope you enjoyed the holiday weekend. A little extra rest. As you know, there are a number of developments over the weekend. And that means that, yes, we are starting off a shortened trading week with a bit of a bang.

And geopolitical uncertainty. It is back. It is back in a big way. And all that just as the World Economic Forum kicks off in Davos. Yes, we have renewed threats of tariffs from President Trump when it comes to Greenland. And I don't know if you saw this part, potential 200% tariffs on French wines and champagnes after French President Emmanuel Macron refused to join Trump's board of peace.

Now, we're coming at you a little earlier than usual with today's video. That's because those developments, well, they're weighing on the stock market this morning. Just look at the equity futures. You could see what I'm talking about. And it's fear over a potential rekindled trade war.

Now, this is likely to be the latest, let's just call it, shock and awe moment due to Trump's negotiating style. But make no mistake, at least in the near term, it's going to put a dent in the market's risk appetite. We also have some other things happening.

Later today, the US Supreme Court could rule on the legality of a large part of Trump's trade policy. That's right, tariffs. And let's remember too, that tomorrow, Wednesday, President Trump is due to speak in Davos. I think folks are going to be watching to see what happens on the tariff front with the Supreme Court.

Are they struck down? What does that mean? Remember, our thinking is that it's more likely to be a slap on the wrist at, if at all, slap on the wrist. Meaning of course, that what has happened has happened. There might be some modification going forward, but that really depends on whether or not the Supreme Court even chooses to rule today.

Remember, there's been one or two expectations, where they were supposed to rule. They did not. Is it possible that they continue to kick the can down the road? Certainly possible. Wednesday, though, when Trump is at Davos, remember, he's supposed to talk about some things on the housing front here, hoping to make it a little more affordable.

I suspect we will also see him talk a little more about Greenland, talk more about his board of peace. The question will be given the reception that he's starting to get, if we take a look at the headlines, does he offer some type of off ramp solution? We'll see.

Now, with that in mind, folks are already starting to talk about buying the dip. But let's think about last year when Trump really came out with this tariff salvo from his perspective, at least. Remember, he bandied them out at extremely high levels only to walk them back to lower levels, kind of setting a high expectation, making something lower a little more digestible, let's call it.

And at that time, buying the dip was indeed the right strategy. We saw that in the market last year, and it very well could be again. However, before we simply jump in, we're going to want to see where is the floor, what is the signal that tells us that there is a more acceptable offer, let's call it, on the table. That could be the catalyst.

So it means the next few days, we're going to have to sit on the sidelines and wait and see for this potential catalyst to emerge. Remember, after closing out our Qualcomm position last week, we have about 8.5% cash in the portfolio. We can put that to work.

But we want to be treading carefully today tomorrow. In the meantime, what's likely to happen? Well, we're going to see some of our more US-focused stocks are lower-- or lower beta names, excuse me, Welltower, waste management, Labcorp, TJX. They're likely to hold up better.

The same is going to happen with the gold holdings we have in the EPS diplomat's basket. However, we should expect some wider swings in the positions in the portfolio that have higher beta figures, Marvell, NVIDIA, Dutch Bros. We know this. We understand what's going to happen.

We're going to continue to focus on the long term, potentially looking for opportunities in the next couple of days should they present themselves, should we get that catalyst that tells us that a floor has been put in the market, that we can potentially pick up some additional shares where it makes sense.

So we're standing on the sidelines, looking to see what happens. Reformulating our pickup plan subject to where stocks go. So you're going to want to pay very close attention the next couple of days. We also, over the next couple of days, are starting to move deeper into the corporate earnings season.

Today alone, before the market opened, 3M and DR Horton, DR Horton, what are they saying about pricing margins and their backlog levels. Remember, we continue to want to assess a potential housing play for later this year. We're going to want to see comments about margins start to firm.

We're going to want to see backlog levels start to stabilize. I don't think we're going to get it here with the December quarter earnings season, maybe March. But again, it's something that we're going to continue to track. And as far as 3M, what are they saying about the tone of the overall economy?

Netflix. What are they saying about advertising as part of their revenue mix? Also too, let's get a little more clarity on this deal for Warner Brothers, Discovery, and United Airlines, of course. What are they saying, not only about domestic travel, but international travel, business travel, as we think about that, for overall consumer spending, but also tying that back to our position in American Express.

And then finally, I just want to end on this note. You'll notice that shares of Logitech, NetApp and in CDW, they're down rather big this morning. Why? Well, Morgan Stanley downgraded all three, but it's the reason why they downgraded it that I want to discuss with you.

Apparently, Morgan Stanley, after conducting a proprietary survey, has found quote, "perfect storm" for IT hardware as corporate spending slows to its weakest levels in 15 years outside of COVID-19. Remember, during the pandemic, a lot of folks started to work from home, remote work, that sort of thing. So there was a big spending wave there.

So this is kind of interesting. We'll have to see if it really plays out. But this is the key. Apparently, the survey of CIOs it pointed to, softer demand with resellers like CDW saying they expect double digit declines when it comes to cutting PC server and storage budgets amid component price increases.

Now, when we talk about servers, let's remember this is not necessarily AI and data center servers. So this, I think, just simply reaffirms our position to say, wow, memory prices are poised to go higher, memory capacity is going to shift more towards AI and data center. So let's remember that end markets matter when it comes to chips.

And this simply reaffirms our decision to exit the shares of Qualcomm earlier in the month. Now, with that said, we will be having a updated set of consensus EPS expectations, panic points, pick up points, and we'll explain why. In that alert, we're upgrading the shares of first trust cybersecurity NASDAQ, ETF, CIBR to a one rating.

Be sure to read that alert. It's going to have a lot of information. And remember, stick with us. You're going to want to get and read your emails, your alerts over the next couple of days. We'll hold your hand, and we'll get through it together. Thanks for watching.