The market came under severe selling pressure again yesterday on fears of trade tariffs and an aggressive rate hike campaign by the Federal Reserve. At day’s end, the Dow fell 420 points and the Nasdaq lost 92 points.
The selloff ended our brief Cabot Tides buy signal from earlier this week, telling us the correction that began in late January isn’t over. The recent bout of weakness isn’t totally surprising given the market’s V-shaped recovery, which was one reason we didn’t put a ton of money to work earlier this week.
Encouragingly, individual growth stocks have mostly continued to hold up well, with many perched near new-high ground. That’s not a reason to be complacent, but we’re OK holding resilient stocks given the market’s positive longer-term stance.
Today, though, we’re going to pare back on one name—Grubhub (GRUB). GRUB has been a great winner for us in recent months, including its moonshot following earnings in January. We think it can continue to perform well, but the stock is extended and it’s by far our largest position. We’ll sell half our shares today and hold the rest.
The Model Portfolio will still have nine stocks, but our cash position after the partial sale will be near 34%.
We’ll keep HubSpot, Shopify and Splunk rated BUY, but keep any new positions small until the market finds its footing.
Stocks now rated HOLD include Alibaba, Facebook, Five Below, Grubhub, PayPal and ProShares Ultra S&P 500 Fund, which is moving back to Hold given the reversal of the Tides signal.