You know we’ve been big bulls on Tech Stocks (SMH), (QQQ), (XLK) but we changed on Monday saying “Did Tech Change Today?”
We’ll talk about the next few days but first a reminder of our change on Monday,
“For our Buys, the stocks we like most, I want to step to the sidelines. It’s not easy but I want to wait for the dust to settle. We need to know if the US is going to cut off huge chunks of revenues for top tech companies or not. Are there bigger moves ahead or not.
We’ve had monster moves in our Buys if you’ve been following us. Scroll through our posts. This accelerated uncertainty is as good a reason as any to step aside after a monster move.
Markets don’t like uncertainty and it makes sense to see what’s in store.
…If we don’t get any export restrictions by earnings I want to build back on our favorite ideas for earnings reports. Until then I don’t want to be the one to bear the risk. An export ban, if any chance at all, is something different.”
That was what we said on Monday after being bullish for a long while.
Export Controls Are Risk
Yesterday and Today the media felt Trump was easing up on trade. We’ve been focused on “export controls” though which have been only moving ahead in legislation. That’s the risk to revenues and earnings for tech companies.
Here’s what The New York Times said on it today,
“The officials also said Mr. Trump will direct the heads of the Commerce Department and other federal agencies to review the nation’s existing system of export controls and recommend any needed changes. That could have a more significant effect on United States companies than restrictions on Chinese investment since it would limit the ability of American companies to sell a range of products to China. The White House has targeted specific products that it wants to prevent China from dominating, including robotics, artificial intelligence, and new energy vehicles.”
That’s the more serious of the laws but maybe until today, has had less focus.
The semiconductor ETF SMH was down all day potentially reflecting the greater exposure to export control risk.
The Next Few Days
Reports have come out that the White House will reveal its plans on Friday. Then on July 6, the first tariffs take effect. Unless we get a settlement between the US and China we’re staring down unknown or negative events plus a long weekend. A market that’s started a downtrend probably has more risk. Tech stocks nearer there highs and the center of the uncertainty get included in that risk.
Conclusion
We’re bullish on earnings season but want to watch out until we get closer or some clarity and settlement between the US and China on trade.
