Digesting “Liberation Day”. Sell Peloton (PTON) and Weave (WEAV)
We are all trying to digest the substance of “Liberation Day” and better understand what lasting impact it will have. Suffice to say, there are a lot of ways this could go. But one thing is for sure – we’re in uncharted territory.
It’s safe to say the announced tariffs represent the worst-case scenario. If they remain at these levels inflation could go up 1% to 1.5% and U.S. GDP could go down by 1% to 1.5%, according to Bank of America.
In other words, the big-picture concern is inflation with low growth, i.e. stagflation.
That scenario would put the Fed in a tricky spot. At the moment the market seems to think the Fed will prioritize a move to protect a flailing economy, despite upside inflation risk, by cutting rates.
There is currently a 61% chance of a June rate cut, and 66% probability that the Fed makes a total of three or four 25-bp cuts by the end of the year.
The 10-year yield has fallen sharply today. Fed rate cuts would, theoretically, continue to put downward pressure on yields. Those high-yield accounts earning 4% might only be paying 3% in early 2026.
That should make equities more attractive, theoretically. Though exactly when and at what level are unknown.
Back to the announced tariffs, they likely represent an opening bid to kick off renegotiation of trade agreements. Things will probably change significantly from Trump’s proposed tariffs to what actually gets implemented.
The $1,000,000 question is, of course, what happens between now and then and what damage is done.
Ultimately, we know that the market will eventually find firm footing and go higher.
We also know we won’t be able to time it perfectly, but if we stay in tune with what the market is telling us then we’ll be there to ramp up exposure when the time comes.
Today, the trends are clearly bearish for many, but not all, areas of the market.
We’ll take that as a sign to step aside from two positions, Peloton (PTON), which has been hit due to tariff concerns and a slowdown in discretionary spending, and Weave (WEAV), which is suffering along with most cloud software stocks.
On the flip side, we will also add half a position in a new stock. The April Issue will come out very soon and feature a small-cap stock that I believe is as good as any for this market.
Actions to take:
Peloton (PTON) moves to SELL
Weave (WEAV) moves to SELL
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