It’s time to tear yourself off a piece of bubble wrap and tie it tightly around your investment portfolio.
“I think [the U.S. economy in] 2020 is certainly murky. One of the challenges I have as a strategist is trying to get my hands around the sheer damage that the trade tensions have caused from an economic point of view. These trade tensions have been bubbling up for 18 months now, but we didn’t see that showing up much in the economic data. It’s only in the last couple of quarters - so it’s starting to do some damage,” explained JPMorgan Asset Management economist Alex Dryden on Yahoo Finance’s The First Trade.
The trade war related damage to the U.S. economy has Dryden advising clients to be cautious on stocks right now.
“As we get an idea of that damage, 2020 becomes more difficult. What I have been saying to investors is that now is the time to be cautious. I think it’s time to add what I call bubble wrap to your clients’ portfolios, a little bit of padding and protection to make sure that if we do hit some bumps in the road down the line that volatility doesn’t de-stabilize portfolios,” Dryden added.
Top economist Mark Zandi over at Moody’s Analytics agrees that the U.S. trade war with China is doing damage to the economy.
Clearly, investors haven’t yet taken a trip to Home Depot for a roll of Dryden’s portfolio protecting bubble wrap.
The S&P 500 notched another record high on Wednesday as investors — as insane as it sounds — continue to cheer worsening reads on the health of the U.S. economy. As the logic goes on Wall Street at the moment, bad news on the economy (see latest ADP jobs report) will only push the Federal Reserve to deliver an interest rate cut shortly.
Investors love putting money to work alongside cheap money from the Fed narrative. Look no further for evidence of that at the aggressive bets being placed of late on trade war related stocks such as Apple and Micron.
As for the next potentially weak economic report that could fuel stocks? Fix your eyes on the June employment report due out on Friday.
Might want to get some of that bubble wrap before that report, just in case — market sentiment could turn at the drop of a dime.
Brian Sozzi is an editor-at-large and co-host of ‘The First Trade’ at Yahoo Finance. Follow Brian Sozzi him on Twitter @BrianSozzi
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