Remember Liberation Day, when Trump unveiled the infamous reciprocal tariffs drawn up on a large card?
I think it’ll go down in history as one of the most “idiotic” photos to ever cause a sudden selloff. It would have been historic, similar to the ear grazing bullet shot with his fists pumped up, if all of that actually started the domino for a global recession.
Good news, is that despite all of the selloffs that happened post Liberation Day, within 50 days, we are now back. Yes you heard it right. The S&P 500 has recovered all its loses from Liberation Day.
So I hoped you bought something, because the Liberation Day discount is over, as of now.
But, the far-sighted us might be wondering: Is it time to buy or sell? There’s no right or wrong answer, but rather multiple answers to different approaches.
For the long term investors – The boring playbook
For long term investors, any time is a good time to buy great companies that will appreciate eventually.
If you didn’t manage to buy anything over the last 1 month, it was a small opportunity lost. But remember, you are in it for the long haul. Buying a great company at today’s price is still going to bring you market beating returns 10-20 years down the road.
The blueprint hasn’t and won’t change regardless.
But from a capital allocation point of view, those who pulled the trigger early would be seeing some good gains over the past 1 month. Those who were waiting for a larger discount, missed it as of now.
Nevertheless, the rule of thumb remains the same – time in the market is better than timing the market.
For the short term momentum traders – The moon-ing bandwagon
The momentum and trend traders would have gotten the memo earlier. Almost 2 weeks ago, the S&P 500 has crept above its 30-day moving average, signalling a possible change in trend. On the opening of 12th of May, the market gapped up, following news of a temporary ceasefire on tariffs between US and China, while India and Pakistan had their ceasefire as well.
As I am writing this post, most of the stock tickers are flashing green. Trend traders might be more reassured putting in long trades, but those who monitored the pre-market prices and the live trading prices would have detected some profit-taking activities transpiring.
Well, short term wise, the market always have the tendency to swing either way. Experienced trend traders who play their cards right would have a few good weeks, barring any change in news and updates from the POTUS.
For newly targeted sectors – the US pharmaceutical industry
The broader market and most stocks might have recovered, but that doesn’t mean Trump is playing nice. Just on Monday afternoon, the POTUS released a tweet on his Truth social media, this time round targeting the high prescription drug prices in the US.
The US pharmaceutical industry is infamously known for the pricing mechanism that it operates, where the drug making companies, the pharmacy benefit managers and the insurers form an unofficial cohort, jacking up drug prices in the US.
When news of the new initiative broke out, shares of major U.S. drugmakers AbbVie Inc (NYSE: ABBV), Amgen Inc (NASDAQ: AMGN), Pfizer Inc (NYSE: PFE), Eli Lilly And Co (NYSE: LLY) and Merck & Co Inc (NYSE: MRK) fell between 2.2% and 3.7% in premarket trading.
Those who think there could be another u-turn from Trump might want to take a deeper look at this beleaguered sector.
For the Magnificent 7 bulls – Time to accumulate more?
It’s a shame that the Magnificent Seven is losing its shine.
Most of the components are still growing. But most are beaten up pretty badly by the market uncertainties.
Yes I know some green candles have been appearing lately, but not all stocks are green YTD.
YTD wise, only Microsoft Corp (NASDAQ: MSFT) and Meta Platforms Inc (NASDAQ: META) are clocking in YTD gains, while the rest are still in the red.
So, there are still some bargains if you think the Magnificent Seven stocks are undervalued.
To buy or sell?
For long term plays, rarely do we have economic events that changes the prospects of a company. These unforeseen and unprecedented policies from the Trump administration will hurt stock prices in the short term.
With the Liberation Day sell-offs officially a joke until we see an unprecedented policy implementation, it looks like the market is still heading up in the short term.
It’s both easy and hard to trade short term in such markets – volatility is guaranteed, but the direction and trend will be haphazard.
However, if you have the knack of riding the trend, now would be a great time to trade.
Else, buying and going long when a sudden dip happens, remains a strategy that won’t go wrong for the long run.
Either way, it still is better than doing nothing.
p.s. if you want to learn how to trade momentum, Alvin shares our strategy at this live webinar.
