S&P 500 Down 5% From All-Time High – Time to Panic?

Michael Vodicka

President at Vodicka Group, Inc.
President and founder of the Vodicka Group. Licensed investment advisor and globally syndicated financial journalist.
Michael Vodicka

Global stocks are nervous about US, China trade relations, with the S&P 500 down 5% from the all-time high. Despite the pullback, the trend is still higher and I see reasons to be optimistic.

It was a bloody day for global stocks.

The S&P 500 fell as much as 2% before a little rally into the close. That decline puts the S&P 500 down about 5% from the all-time high. Take a look below.

This blast of weakness is being driven by uncertainty around the US, China trade negotiations. It looked like a deal was imminent a few weeks ago – but the talks have broken down pretty badly.

The US introduced a new 25% tariff on $250 billion of Chinese imports and is planning another $300 billion. The US has also implemented sanctions against Huawei, one of China’s largest tech companies that has been accused of stealing intellectual property from US tech companies.

Meanwhile, Chine is striking back, adding tariffs on $60 billion of US goods, threatening to ban exports on rare earth minerals and discouraging and shaming Chinese citizens from buying Apple products.

The bottom line here – this is one heck of a battle and both sides are really digging in.

Here’s the good news.

We could be in for a little more pain in the short run but I don’t think this is the beginning of a big meltdown for stocks or the US economy. Here’s why.

#1 US stocks are having a great year. Even after the 5% decline the S&P 500 is still up more than 14% when adding dividends. This weakness could be some minor profit taking after a big run in the last five months.

#2 May is historically a tough month for US stocks.

#3 The trend is still higher in US stocks. Take a look at the 3-year chart below.

#4 I still expect a trade deal between the US and China.

This is a very tough trade battle – but both sides want this thing to be over – trust me. Hear are some thoughts from some insiders.

Trump’s Point Man on China Trade Is Still Trying to Close the Deal

U.S.-China Trade Talks Will End With a Deal, Former Negotiator Says

If a trade deal gets done – I expect to see an epic rally in the stock market. Because there are still plenty of reasons to be optimist about the global stock markets and economies. I wrote a detailed report on my outlook for global stocks if anyone wants to review.

S&P 500 up 18% in 2019 – Here’s the Plan

For long-term investors sit tight and ride out the volatility. Use weakness as a chance to add cash to the market.

For short-term investors or retirees, if this volatility makes you really nervous that’s an indicator that you own too many stocks. Think shifting cash into bonds, CDs or cash to be more conservative.

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If anyone has questions or comments feel free to say hello.

Your Investment Partner,

Mike

This report is for entertainment purposes only. Every investor should consult with an investment advisor before making investment decisions. The Vodicka Group, Inc. is not a broker/dealer. We do not receive compensation for mentioning stocks. At various times, the clients, publishers and employees of Vodicka Group, Inc., may buy or sell the securities discussed for purposes of investment or trading.