A couple of weeks ago in MoneyMorning, I shared “four principles when investing in times of market turmoil”. One of them was – “Time in the market matters, not market timing”.
Here’s what I said,
Very few traders or investors can accurately predict short-term market moves. Moreover, investors who sit on the sidelines risk losing out on periods of meaningful profits that follow downturns.
From 1929 through 2024, every S&P 500 decline of 15% or more, has been followed by a recovery. The average return in the first year after each of these declines is 52%. Of course, past performance isn’t indicative of future performance.
Nevertheless, even missing out on just a few trading days can take a toll. For example, a hypothetical investment of $1,000 in the S&P 500 in 2014 would have grown to $2,869 by the end of 2024.
Now, if an investor missed just the 10 best trading days during that period, they would have ended up with 45% less.
So, why do I bring this up?
Well, due to Trump’s “Liberation Day” tariffs, many investors started selling US stocks thinking the worst.
And if you followed the crowd, you would’ve missed out…
The S&P500 just experienced one of the best run-ups!
The S&P500 rose every day from 22 April to market close on 02 May — one of the longest win streaks in stock market history. In fact, the S&P 500 has now rallied more than 10% over this nine-day stretch, marking its longest winning streak in 20 years.
Moreover, it’s now above its closing level on 2 April – “ Liberation Day.”
Simply put – it pays to stay invested!
While, the S&P500 took a breather on Monday, I’m still bullish.
Here’s why…
Trade deals and resilient tech earnings point to more upside…
Firstly, the US economy added 177,000 jobs in April, beating expectations of 138,000. It’s also only a modest slowdown from March’s 185,000 figure.
Of course, tariffs will likely hit May’s data harder. The reference period for April’s report came too early to fully capture the post-Liberation Day shock.
For instance, the sharp decline in container-ship departures from China to the US didn’t begin until after that reference period closed.
So, expect to see softness in the May jobs report, especially in logistics, travel, and hospitality — sectors that typically take the first punch in a trade war.
That being said, China has confirmed that the US has officially reached out to restart trade talks. That’s not a trade deal yet. But it is a huge step in the right direction. And it’s enough to spark optimism in the markets.
I also expect the US to conclude multiple trade deals this month (India, Japan, South Korea, and others), which should boost market optimism.
And let’s not forget “Earnings Season”, which has been surprisingly strong overall.
Roughly 70% of S&P500 companies have reported Q1 numbers already. And roughly 75% of them have beaten EPS estimates — which is in line with the post-pandemic average.
More specifically, the major AI players continue to report blockbuster earnings – Meta, Google, TSM, Microsoft, Micron, Lam, Vertiv and more.
Importantly, many have issued resoundingly bullish commentary on the health and acceleration of their AI businesses.
So, my gameplan is to stick with US tech (especially AI-focussed companies) avoid US consumer stocks, which are more likely impacted by tariffs, and ignore what the crowd is doing.
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