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A May to Forget

Jim Giaquinto

This difficult month was bookended by negative tariff news. It started a few weeks back when the U.S./China trade talks suddenly broke down and ended today with President Trump threatening new tariffs on Mexico.

In between, the major indices put together their first down month of 2019. And it wasn’t just slightly off; the NASDAQ dipped by about 8% in May while the Dow and S&P each declined approximately 6%.

We knew that Friday’s session was going to be tough after the President unexpectedly threatened to impose a 5% tariff on Mexican imports starting on June 10 if that country doesn’t help us at the border.

And that’s not all, the tariffs will progressively rise throughout the year and could reach as high as 25% if Mexico doesn’t help the U.S. with illegal immigration.

That’s the last thing the market wanted to hear, especially since the relationship with China has been deteriorating.

The NASDAQ plunged 1.51% (or nearly 115 points) to 7453.15, as technology will really feel the impact of a broadening trade conflict. The S&P retreated further away from 2800 with a dive of 1.32% to 2752.06.

These indices have now dropped for four straight weeks.

The Dow dipped by more than 200 points on Monday and then again on Tuesday, but today it slipped by nearly 355 points. The index plunged 1.41% to 24,815.04 for its 6th straight week in the red.

Thankfully, this was a shortened week due to Memorial Day on Monday.

At least May is finally over. The market goes into June with its first significant pullback of the year, which many investors felt we needed after such a strong start to 2019. It could mean that stocks are primed for a bounce back on good news. We’re certainly due for some.

But where will that good news come from?

Today's Portfolio Highlights:

Home Run Investor: An expanding trade conflict has prompted Brian Bolan to protect his gains moving forward, especially in the technology space. On Friday, the editor sold software company Everbridge (EVBG) to secure a robust return of 81.7%. This name was added last year because it served as both a security play AND an Internet of Things (IoT) play. Brian also pulled profits from Lindblad Expeditions (LIND, +8.2%), Alarm.com Holdings (ALRM, +1.6%) and Clarus Corp. (CLAR, +0.8%). He’ll look into replacement picks next week.

Value Investor: It’s been a pretty good year for truck manufacturer PACCAR (PCAR), but the bears have been chipping away at this cyclical name of late. And now the possibility of tariffs on Mexico adds even more uncertainty to the equation. Tracey decided to lock in her games on PCAR while she still had a double-digit profit. The stock was sold on Friday for a 15.2% return. The editor is “thinking outside of the box” when looking for new additions that provide some shelter from the trade conflict. Read the complete commentary for all of today’s moves and be ready for replacement picks next week.

TAZR Trader: With companies being bombarded by data these days, it’s crucial that they know what to track and how to use it. That’s where Alteryx (AYX) comes in. It provides a software platform that allows companies to create their own “self-service” data analytics. Kevin has been watching this name for a while and decided to buy a 7% to 8% starter position now that it has pulled back a bit from its post-earnings surge earlier this month. The editor also bought a starter position with the same allocation in Invitae (NVTA), which is a genomic analysis company that provides medical-grade diagnostics. Read the complete commentary for more on today’s moves.

Technology Innovators: President Trump’s sudden threat of tariffs on Mexican imports will likely keep the market under pressure moving forward. Technology could be especially susceptible to new or higher tariffs, so Brian Bolan felt this was a good time for a hedge. On Friday, the editor bought ProShares UltraPro Short QQQ (SQQQ). Basically, this triple short ETF will go up when the tech market goes down, which is where Brian feels the space is headed amid all this trade uncertainty with China and now Mexico. Brian also protected a couple profits by selling Perficient (PRFT, +7.5%) and MongoDB (MDB, +4.6%). Now the portfolio is better protected against further downside, but has cash at the ready for the next move higher. Read the full write-up for more.

Have a Great Weekend!
Jim Giaquinto

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