The market was crushed yesterday as fears of a trade war with China picked up. At the close, the Dow had lost 724 points while the Nasdaq had fallen 179 points.
Yesterday’s decline was enough to kill the market’s jagged rally attempt that began in early February, pushing our Cabot Tides back into a cautionary stance.
Encouragingly, many growth stocks that showed powerful and persistent action are still holding up well, and we still advise holding your strong, profitable stocks. But it’s best to cut back on new buying and consider raising more cash by pruning your weakest performers.
In the Model Portfolio today, we’re going to sell half of our remaining shares in both Alibaba (BABA) and ProShares Ultra S&P 500 Fund (SSO), two longer-term holdings that that have been unable to get going in recent weeks. Combined with our sale of Facebook earlier this week, the portfolio’s cash position will be around 35%. We’re also putting PayPal (PYPL) back on Hold.
Stepping back a bit, the market’s longer-term trend remains firmly up, there’s plenty of bad news to go around and there are a ton of growth stocks ready to lead if the market can find support, possibly near its February lows. Thus, we don’t advise hiding in your storm cellar, but it’s prudent to pare back and keep a close eye on how things unfold.
The portfolio still has nine stocks and we’re keeping HubSpot (HUBS), Proofpoint (PFPT), Shopify (SHOP) and Splunk (SPLK) rated BUY, but keep new positions small and only buy if you have plenty of cash on the sideline. Stocks now rated HOLD include Five Below (FIVE), Grubhub GRUB), PayPal (PYPL) and our remaining shares of Alibaba and ProShares Ultra S&P 500 Fund.