Cash is King!
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Last week, I sold my gold (15%) and silver (10%) ETFs. The market wasn’t rewarding me for taking risk, so I moved to 100% cash and await a Follow-Through Day (FTD). An FTD typically occurs four days after a market bottom when the S&P 500 or NASDAQ jumps by at least 1.2% on higher volume. This is often a sign that institutional money is moving back in, which could signal the start of an uptrend. Institutions and hedge funds have the resources to hire top analysts, so I prefer to follow smart money as they create trends with their consistent buying. While it may take some time for bases and trends to form, I remain disciplined and patient.
The S&P 500 is down 13.4% YTD, and the NASDAQ has dropped 19.2%. I anticipate more capitulation selling this week, as investors trying to “buy the dip” may catch a falling knife. However, a substantial buying opportunity will emerge once the selling pressure subsides. We must wait for the dust to settle before re-entering the market.
The market is still grappling with the economic effects of the retaliatory tariff war, and it seems the Fed is considering a rate cut in June. However, the Fed knows this could spark inflation without encouraging growth, leading to stagflation. With limited tools to handle a stagflationary environment, we could be stuck in a high-risk, low-reward environment longer than anticipated.
Last Friday’s jobs report showed the economy added 228,000 new jobs, nearly double the expected 130,000. While that’s positive news, it might not be enough to ease concerns about the US’s financial strategy and its attempts to alter global trade. Meanwhile, Congress hasn’t yet passed a measure to keep the government running. Could we be facing a US debt downgrade soon?
If tariffs continue to escalate, we might witness a global economic restructuring as international trade is redefined. Interestingly, $100 in gold is more efficient than $100 in cash, as gold is a better way to transfer value physically—especially considering the US no longer issues bills larger than $100.
Trump’s “Liberation Day” of reciprocal tariffs ended up being an obliteration for many stocks, which were hammered by tariff uncertainty and widespread selling. Consumer confidence took a hit, and investor sentiment plummeted. The market could see more selling Monday as futures point to a 5% drop. Grace & Peace to You and Your Loved Ones!
Watch List: ADMA, ATGE, BOW, CALM, CBOE, CPRX, CVCO, EAT, HMY, IBN, LRN, MRX, OPCH, PHYS, PFSI, PLMR, PRMB, RGLD, SFM, TGTX.
So that being justified by his grace, we might become heirs according to the hope of eternal life. Titus 3:7
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Dexter Lyons, Portfolio Manager
337-983-0676, ChristianMoneyBlog.net
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Actively Managing Risk Since 1990!