Retail investors may not have done much selling yet, even as stocks slide and U.S. trade policy continues to threaten markets, Crossmark Global Investments CEO and Chief Investment Officer Bob Doll suggested Monday.
"Risk asset markets remain threatened by U.S. trade policy," Doll wrote in his weekly Doll's Deliberations newsletter, noting that new reciprocal tariffs are expected to be announced Wednesday, the next expected step in the U.S.-led trade war.
"Elevated trade uncertainty will be a headwind for the global economic expansion. The key investment issue is whether the U.S. administration will push the global and U.S. economy over the cliff in pursuit of hoped-for long-run benefits," he said.
"For now, we recommend remaining defensive. There is evidence that much of the selling in the last few weeks has come from de-risking from hedge funds, implying that the public and other long-only investors have not done much done much selling (yet)," Doll noted.
It's unclear how extensive long-term tariffs will be, he said.
"While there have been brief moments of hope that tariffs will be toned down, uncertainty will persist and a cloud will hang over the global economy for some time yet," Doll wrote. "At a minimum, a choppy global investment backdrop will persist."
Crossmark recommends patience before turning positive or preparing for recession, Doll wrote, saying the U.S. economy seems to be holding up despite a sharp souring in consumer sentiment.
The economy faces the risk that depressed expectations translate into weaker spending, followed by soured corporate profit expectations, company retrenchment, an undermined employment outlook and a significant period of weakness or recession, he said, adding that such an outcome might develop if consumers face higher inflation due to tariffs.
A close monitoring of profit news and corporate guidance as well as actual layoffs is warranted, Doll wrote.
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