These are confusing times for investors. And “confusing” may be a euphemism for “challenging,” “exhausting,” “stress-inducing” or “scary.” You’ve probably felt a whole range of emotions in the last couple months, and certainly in the week-plus since the so-called “Liberation Day” sent markets into a frenzy that’s still ongoing.
One day the selling is relentless and it seems stocks may never recover. The next, markets have their best day in decades and it feels like the clouds have parted. Some days (like Wednesday, when President Trump issued a 90-day “pause” on most tariffs, with the very notable exception of China), those two extremes occur in the same six-and-a-half-hour trading session. It’s volatile out there – more volatile and uncertain than things have been on Wall Street since the 2020 Covid crash.
So, we wanted to hear from you. On Monday, Ed Coburn, our president and publisher, sent an email to all Cabot readers asking for your questions, comments and general feedback on all things tariffs. And you delivered! We received a number of responses. As usual, our analysts had answers. Below, I have compiled your questions and the accompanying responses from Cabot analysts. But this is just a start. The tariff market is far from over. Volatility remains sky-high. Uncertainty remains. So we still want to hear from you. If you have any further questions, simply send them to support@cabotwealth.com.
In the meantime, here are our answers to some of your most pressing questions…
[text_ad]
Question: What should you do if you own a large amount of the Mag. 7 and half of your assets are also in the S&P 500?
Mike Cintolo, Cabot’s Chief Investment Strategist: Thanks for writing. Well, we can’t give overly personalized portfolio advice, but obviously the trend of the market and most of the Mag. 7 is pointed down at this point ... though, after the panic selling seen last Friday and again on Monday, the odds are growing that the market is near some sort of low (maybe not THE low, but a low that can be worked off of). Thus, our advice is to take a step in the direction of the evidence, which is bearish – sell some of your positions, or partial stakes of a few positions – but given the panic selling, we likely wouldn’t be selling wholesale here, nor would we be picking the bottom. If it were us, we’d be paring back and then seeing how it goes, possibly selling a bit more if the (Wednesday’s) bounce gains steam.
Question: Okay, here is a key question for you: Will gold’s bull run still continue and what will be the top end – $5,000, $10,000, more?
Clif Droke, gold and metals expert and Chief Analyst, Cabot Turnaround Letter: Yes, I absolutely can see gold’s bull market continuing well into 2025 and beyond. Driving gold is a combination of safe-haven demand from the obvious uncertainties surrounding the global trade/economic outlook. Then there’s gold’s currency component, which is pushing additional safety-related demand due to inflation being an ongoing concern.
The development of the BRICS (Brazil, Russia, India, China and South Africa, plus other countries) currency is another major, and overlooked, demand driver. BRICS could especially drive gold substantially higher longer-term if gold ends up backing the new currency, as many have speculated will be the case.
And as the BRICS nations’ de-dollarization presumably accelerates in the face of trade disputes with the U.S., investors both at home and abroad might begin to look askance at the dollar and look to gold to hedge against a potentially weaker dollar in the coming years.
As far as can gold continue soaring to prices previously unseen, like $5,000 or $10,000 or even higher, there is a principle that was famously explored decades ago by the well-known market technician W.D. Gann, in which stocks or commodities that crossed psychologically significant “big round numbers” like 1,000, 2000, etc., continue climbing over a period of years until they end up doubling or tripling before they end up completely losing their long-term momentum.
He observed that when an asset price crosses above these benchmark levels, it tends to build more upside momentum as investors increasingly pile into the market since “big round numbers” serve as the best possible advertisement for the asset.
For instance, bitcoin first hit 1,000 right around the start of 2017, then doubled a few months later that same year, then doubled again in quick fashion and ultimately ended up at nearly 14,000 by 2018.
We saw similar episodes (although on a smaller magnitude) with the major stock market indexes in the late 1990s as one big round number after another was crossed in quick succession. I believe we’re fast approaching the point in gold where its long-term forward momentum is creating a feedback loop that will serve as a further impetus to much higher prices.
As to where the gold bull market ultimately terminates, I can only estimate, but I can definitely see $5,000 an ounce gold within the next couple of years.
Question: During the Covid market crush, I didn’t sell, which in hindsight was a good decision, but now I’m not sure whether I should hold any stock at all, meaning whether I should sell everything before it’s too late.
Mike Cintolo: Well, first, I’m glad that holding through the Covid crash (and recovery) worked out – but depending on what you’re investing in, holding and hoping usually isn’t a great long-term strategy. I’m not talking about owning a diversified mutual fund – that can come back, no problem – but select, volatile growth stocks are a different story. Many are still 50% or 75% off their 2021 highs, in fact.
That said, as for the here and now, the odds favor (a) we’ve hit some sort of low the market can work off of in the near term, but (b) more repair work will be needed (bottom-building effort) before a sustained advance develops.
Thus, we’d be mostly defensive here and are OK selling some broken names into strength in the days ahead, but I also wouldn’t advise selling wholesale, at least at this point. The ultimate goal is to hop on board the leaders of the next sustained advance, whenever that begins.
Question: I understand Cabot Wealth Network doesn’t make predictions and goes mainly with the evidence in front of us, but in this type of volatile market, personally (I am a subscriber), I would like to receive more market updates from Cabot Publishing, say at least once a day, and accompanied by charts, until this wild market swing has stabilized.
If this market turns out to have a V-shaped recovery, then all is fine, but what if the market bounces but then it continues to drop? I certainly would like to receive more updates that talk about resistance, support, the tariffs’ effects on stocks, the type of stocks that would be most affected, etc., and then I/we can decide whether to sell partial or sell every stock and then return to buy stocks when the bull market is clearly in the upswing.
Chris Preston, Cabot’s Editor-in-Chief: Ask and ye’ shall receive! As we did during Covid, we have created a special “tariff” page where you can keep up to date on all our latest advice on how to navigate these tariff-infested investing waters.
It includes answers to your questions from our analysts; the latest episodes of Street Check, the weekly podcast I co-host with Cabot Wealth Daily editor Brad Simmerman, where we’ve been talking tariffs in great depth of late; and much more.
Stay tuned. And best of luck out there. More than ever – we’re here to help!
[author_ad]
