It's been a long while since I updated. As shared previously, I am mostly in cash as I have foreseen some turmoil at the beginning of the year. When the major US retailers have started sounding off the alarm in Feb/Mar regarding weaker consumer spending, I sold off most of my holdings. Since then there has been a lot of volatility. I have been trading hedges and volatility ETFs. The sentiment is still very weak with a lot of uncertainty. The 2 largest economies have not yet started negotiation. The tariffs are forecasted to hurt the economy especially with small and medium businesses taking big hits. Inflation will return and growth will slow. There is already some evidence that the stance may be softening, judging by the exemption of electronics and semi, and call for rate cuts presumably to cushion the inflation impact. Afterall, with domestic pressure, and rising unfavorable polls, I don't think the tariffs can continue for too long. In fact, the man himself said there could be a deal with China within 4 weeks, somewhat implying that the whole thing should come to an end or de-escalate soon. I am doubtful a deal could happen so soon though, if at all, since the 2 leaders are not even talking directly yet. Even if there is a deal, it might be one that is not so favorable, and there would still be some level of tariffs. I don't think all the tariffs will be removed. Further, there might be more coming soon, semi/pharma/minerals tariffs.
The 2 main uncertainties are how high would inflation go, and how low will economic growth go? Recently, all forecasts have been not very accurate. Going forward, the forecasts will be even more inaccurate given the chaotic situation right now. Any misexpectation will cause shocks to the stocks.
It is really hard to say whether the bottom is in, especially given that there is no Fed 'put'. Will the markets drop further before recovering or just go up from here? Therefore, it might be wiser to just DCA slowly for those long-term investors, and hold really strong stocks that can weather any storms. For me, I will just continue to nibble very slowly while trading hedges.
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