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Politics Takes a Bite Out of Stocks

Jim Giaquinto

This headline-driven market usually turns a deaf ear to all the political squabbling in Washington… but not today.

News that the Democrats were readying an impeachment inquiry for President Trump had a big impact on the market.

Stocks momentarily came back a bit when the President said he would release the transcript of his call with the Ukrainian president, but it didn’t last.

After a lot of volatility, the NASDAQ plunged 1.46% (or nearly 119 points) to 7993.63. The S&P slipped 0.84% to 2966.60 and the Dow was off 0.53% (or around 142 points) to 26,807.77.   

The major indices are still up for the historically-difficult month of September, but we certainly can’t have many more sessions like this in the remaining four days.

Even without all the impeachment talk, this would have probably been a rough day for stocks. The President gave a speech at the UN today and was pretty tough on China, which is not what the market wanted to hear as we hopefully head toward high-level trade meetings next month.

The one thing the market didn’t need was another uncertainty, but here it is! Impeachments (or inquiries into them) don’t come around every day. Last time with President Clinton in the 90s, stocks plunged at the outset but more than recovered afterward.

No one knows how it will work out this time. However, we DO know that there will be tons of new headlines and tweets moving forward, which means stocks will remain susceptible to the whims of the daily newsflow.

So, there’s nothing new on that front. We’ll just have a lot more potential for stocks to swing sharply in either direction.

The more immediate question is what this political turmoil could be mean for the trade negotiations. Might China decide to take it slower with Trump under pressure, or can they not afford to keep putting things off?

That’s the problem with uncertainties… we don’t have the answers yet!

Today's Portfolio Highlights:

Stocks Under $10: This portfolio has several stocks that are really moving of late, so Brian wants a new position that’s not as volatile. He thinks that Playa Hotels & Resorts (PLYA) will fit the bill. The company owns, operates and develops resorts, primarily in Mexico and the Caribbean. The editor feels this name will be more stable and not move by 5% or more very often. Plus, it’s nice to see that PLYA has reported back-to-back triple-digit quarterly surprises. The portfolio also moved to protect its gain in The Rubicon Project (RUBI) on Tuesday after a third of its gain recently faded away. Brian sold it and secured a profit of 38.1% in about three months. Read the full write-up for more on all of today’s moves.

Home Run Investor: Sometimes it’s better to be safe than sorry. Brian doesn’t like the market action right now, especially when looking at the VIX and the continued pressure on some tech names. Therefore, he “lightened the load” across all his services today by selling big winners while he can still secure double-digit returns. In this portfolio, he sold software development company Zendesk (ZEN) for a 56.6% return in about 18 months and also got out of electronics – manufacturing machinery company Ultra Clean (UCTT) for a 31.9% profit in nearly 5 months. 

Technology Innovators: In this portfolio, Brian continued his “de-risking” moves by cashing out a couple big-cap tech names amid all the selling. He sold Amazon (AMZN) and banked a 21.1% return, while also getting out of Alphabet (GOOGL) for a 5% profit. The portfolio also sold FANG+ Index 3X Leveraged ETN (FNGU) and secured 19.3%. 

Zacks Short List: There’s only one swap in this week’s adjustment. The portfolio short-covered Gardner Denver Holdings (GDI) for a return of 7.2% and replaced it by adding Ceridian HCM Holding (CDAY). Learn more about this emotion-free portfolio that takes advantage of falling and volatile markets by reading the Short List Trader Guide.

All the Best,
Jim Giaquinto

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