Perhaps it’s a good idea to “Sell in May, and Go Away” this year.
Since new tariffs were announced, the S&P 500 has lost $1.2 trillion – and it may be far from over. In fact, analysts forecast more pain ahead as China now begins to retaliate by raising tariffs on $60 billion of U.S. goods.
“Our view is this could escalate for at least a matter of weeks, if not months, and it’s really to get the two back to the negotiating table and finish the deal, is probably going to require more pain in the markets. Really the only question is if we need a 5%, 10% or bigger market correction,” said Ethan Harris, Bank of America Merrill Lynch, as quoted by CNBC.
The Hardest Hit Stocks with Trade War
Boeing (BA) shares took a hit after the Global Times said China could single out the company as the U.S. China trade war intensifies. At the moment, the stock is down $14.67, or $4.14%. As tweeted in China, “China may stop purchasing US agricultural products and energy, reduce Boeing orders and restrict US service trade with China. Many Chinese scholars are discussing the possibility of dumping US Treasuries and how to do it specifically.”
Intel (INTC) id down $1.20 at the moment, but could fall further. Unfortunately, it’s vulnerable to the trade war with about 25% of sales coming from China.
Apple (AAPL) is down $10 a share to $187.18 because 18% of its sales come from China. “Apple has one of the most significant exposures to Chinese exports to the U.S.…given final assembly for many of its consumer devices is located in China,” wrote analysts at Morgan Stanley, as quoted by Barron’s.
Tesla (TSLA) is down more than $11 a share, as larger tariffs throw a wrench into its international growth strategy. Considering that China is the biggest car market in the world, Tesla needs that market to offset cooling demand in the U.S. Even General Motors (GM) is down slightly with Chinese sales a big part of its bottom line.
However, as we’ve learned from top investors, look to buy the excessive fear.
What We Learned from Buffett, Rothschild, and Templeton
Sir John Templeton wasn’t your typical Wall Street money manager.
In 1939, Europe was just about decimated. So, Templeton bought every European stock trading below $1.00 a share and made a fortune. In fact, he bought shares in 104 companies for about $10,400. He would make a fortune.
He taught us to buy excessive pessimism.
To this day, Warren Buffett advises that a “climate of fear is your friend when investing; a euphoric world is your enemy.” And of course, we all remember his advice to “be fearful when others are greedy and greedy when others are fearful.”
One of the greatest examples was his stake in shares of The Washington Post.
Shares may have plummeted in the bear market of 1973-74, but the billionaire still saw value, buying and watching his take explode more than 100 times over.
Baron Rothschild once told investors, “The time to buy is when there’s blood in the streets, even if the blood is your own.” He knew that very well, considering he made a small fortune buying the panic that followed the Battle of Waterloo against Napoleon.