President Trump’s talk on tariffs has the potential to start a trade war. Certainly there will be lots of noise, as is usual with Trump, and in our analysis, the probability of a trade war with dire consequences is not high.
But it is simply prudent to take protective steps. Let us first explore with a chart, and then I will share the names of 10 popular stocks that would be at risk if there is a trade war.
Please click here for the annotated chart of S&P 500 ETF SPY. Similar conclusions can be drawn from the charts of Dow Jones Industrial Average DJIA, DJIA ETF DIA, and the Nasdaq 100 ETF QQQ. Please note the following from the chart:
• The most important observation from the chart is that the VUD indicator was consistently orange. The VUD indicator is the most sensitive indicator of supply and demand in real time. When demand for stocks is higher than the supply in real time, it is bullish and the indicator is green. When the supply of stocks exceeds demand in real time, the indictor is orange. The indicator has been orange, showing persistent net selling.
• The Arora Report warned investors of the potential trade war in the Morning Capsule that is made available to subscribers before the market opens. We wrote well before the news of tariffs hit: “Trump is set to announce tariffs on steel and aluminum. The rumor is that he will impose harsh duties of 25% on steel and 10% on aluminum from all countries. We will keep a close watch to see if it starts a trade war. If it does, we will need to make changes to our portfolios. The key will be to get ahead of the crowd.”
• The chart shows that, hours later, the news of tariffs hit.
• The market fell hard on the news.
• The chart shows the timing of the Arora call to increase cash and hedges by specified amounts out of abundance of caution. Our philosophy is that return of capital is more important than return on capital….Read more at MarketWatch.
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