VIDEO: What We're Watching For as Tariff Turmoil Keeps Us Sidelined

In today’s Daily Rundown, Chris Versace reviews the latest developments on the Trump tariff front and explains why market uncertainty is keeping the Portfolio on the sidelines. 

Chris also shares what the Portfolio will be watching this week as we continue to game out potential tariff-related scenarios. With that in mind, he touches on the Portfolio’s updated shopping list that was shared earlier and the latest additions to the Bullpen. 

Transcript

CHRIS VERSACE: Hey, everyone. Chris Versace here. April 7th. I'm sure you've seen the market. Obviously, it's been seesawing a little bit today. You know, investors continue to try to puzzle what is next on the terror front and what might that mean for the US economy, inflation, the Fed, S&P 500 price targets, and from our perspective as well, the upcoming earnings season. It's been a smorgasbord, if you will, of things that have happened really over the last few days.

I think folks were hoping over the weekend that some sanity, some sobering, if you will, would have kind of shown up, that perhaps there would have been some trade deals that were announced, that perhaps, maybe some of Trump's reciprocal tariffs might have gotten rolled back. But obviously, as we saw Sunday night, that was really not what was going to be happening. If anything, between one of the comments that the president made Sunday night and even earlier today about potentially escalating reciprocal tariffs on China, if it does not back down with its 34% retaliatory tariffs, it just tells us that this is likely to be a protracted engagement.

I really don't know any other way to describe it. So but at the same time, there are other factors out there that we're kind of waiting on, you know, what will happen with the eurozone and any retaliatory tariffs that they might slap on, particularly on the services sector. At the same time, are there other trade negotiations that might unfold that might offer a glimmer of hope?

So I think what's going to happen is the market, just given the level of angst, uncertainty, we talked about this with the fear and greed index being where it is as of this morning. But this high level of uncertainty, it is going to keep the market seesawing, moving back and forth, really trading on the most recent headline, and then perhaps even the most recent tweet. And you know, there's an example today that I think really speaks to why we need to tread very carefully to avoid being head faked. I don't if you saw it, but when the market started to rebound a little bit today, even moving into positive territory for a short bit, there is a report out that supposedly President Trump was considering a 90-day moratorium on tariffs.

And that was quickly rebuked, called fake news. And, you know, the market resumed its sell-off. So we have to tread very, very carefully. You know, as I said in our comments, both in Friday's roundup and again earlier this morning, we want to make sure that we have enough clarity so that when the time to move happens, we have a high degree of confidence in the moves that we are making.

And as we just look out, we are going to start to get some more earnings tonight with Levi Strauss. In an Alert, I shared what we're looking for there. But we'll get more later this week. We could get some corporate earnings preannouncements, but we're also going to get a lot more information in the coming days as well.

Fed speakers, more data. You know, as we put all that together, it's likely to be or not be, I should say, until we see some movement on the tariff front, good or bad, that the clarity is likely to come. And the clarity could be that we might have to call up one, two, maybe more names from the bullpen that are more in that inelastic business model. I'm sure today you saw that we called into the bullpen the shares of T-Mobile, the SPDR utilities ETF, XLU, and American Water Works.

All of these, if you think about them, are very inelastic. Folks are going to continue to buy these services no matter what's going on, especially with T-Mobile in today's increasingly connected world. We do need power to power our devices and of course, water. So these names are more defensive in nature. And if we do see the economy start to really slip into signs that a recession is increasingly likely, we may call these up into the portfolio.

But at the same time, just gaming it out, if we do see some progress on trade deals, if we do see the possibility that Trump's reciprocal tariffs could be dialed back a little bit, we shared our shopping list with you so that we'll be ready to strike. So really gaming out these two different scenarios. And we'll continue to evaluate those. We'll also continue to evaluate other candidates, both for the portfolio and for the bullpen as we have a clearer sense of what is likely to unfold.

We will, however, I say, continue to stick with the notion that we want companies that are benefiting from structural change poised to deliver superior earnings. Now, in this case, with some of these inelastic names in a slower environment, they could very well be delivering superior earnings growth. So we'll continue to, like I said, monitor the developments and update our plans and thoughts accordingly and reshape the portfolio as needed. But in terms of our roadmap for the week, I just want to share a couple of things with you.

Tonight, as I said, we have quarterly results from Levi Strauss. Tomorrow, Tuesday, we have the NFIB, small business index. We will be looking at the uncertainty indicator for that. My suspicion is that it did not make a dramatic improvement compared to the last reading that was at or near record highs for corporate uncertainty. So we will be paying close attention to that.

Wednesday, Delta airlines will report. We're going to pay close attention to what they have to say about their travel forecast to the degree to which it is softening, how much of that might be domestic versus international. Wednesday afternoon, we have the Fed's latest FOMC meeting minutes.

Candidly, I think we're going to get a bit of a pass on this. Why? Well, let's consider what Fed Chair Powell said last Friday. The economy, as he sees it based on the latest data, is still chugging along. He does see tariffs as a risk to inflation, with inflation likely moving higher in the coming quarters. Again, he essentially threw cold water on the notion of rate cuts.

Yet today, the market is still continuing to look somewhere between four and five rate cuts. We'll have to see what upcoming data says about that. On Thursday, we get the March CPI, again, just given my comment, what I said about Powell last Friday. Same here. I think the March CPI report on Thursday and the March PPI report on Friday, they're going to get looked through, right?

Because again, we know that the data has already started to move higher. And with tariffs moving in, odds are upcoming inflation data is going to be moving in the wrong direction. Two other things. One, Wednesday. That is the date that Trump's reciprocal tariffs go into effect. And then Thursday, that's when China's retaliatory tariffs go into effect.

So there's a lot of moving pieces, a lot of stuff kind of coming our way. And we will do our best to digest and share what the data, what the actions say to us and what that means for the portfolio and what we might need to do. But remember, please remember this is important.

What we want is a clearer picture so that when we make the moves, we can do so with a relatively high degree of confidence. And again, that may not be in a day or two. It might take just a little bit longer than that. But we want to have the stars aligned, so to speak, so that when we move, we're very comfortable and confident in what we're doing.

We will continue to plot our next moves like we did in one Alert earlier today. So please, folks, when it comes to what's unfolding on the tariff front, we're positioning the portfolio, and just some larger thoughts about the market, things that we're watching, whether it's the oscillators, the VIX level, what have you, please continue to check your emails, your Alerts. This is, like I said, I know it's a very emotional time for some. I know it's a very angst-filled uncertain time.

But our goal here is to guide you through it. So please be sure to check your emails, your Alerts. And if we do make any moves with the portfolio, remember, we want you right there with us. Thanks for watching.