The stock selloff Thursday ignited by sweeping new tariffs may leave room for a big rebound on any promising economic news, Carson Group Chief Market Strategist Ryan Detrick said, pointing to some positives in the market that could help clients sleep better as portfolios falter.
“Liberation day turned into obliteration day, as stocks are having one of their worst days in years over higher than expected tariffs. The truth is investors are taking a sell first and ask questions later approach over the potential ramifications of the new tariffs, and potentially more importantly, any retaliation from our trading partners," he told ThinkAdvisor in an email.
“As bad as it feels, there are some positives out there and that is important for advisors to remind clients. Bonds are having a great year and finally providing some zig (when) stocks zag to help investors sleep at night," the strategist explained.
"Not to mention after two amazing years, the U.S. is taking a step back, but the majority of global markets are still up nicely on the year, reminding everyone why it is so important to stay diversified and not just chase the latest strong sector or shiny object," Detrick said.
“The odds of a recession is no doubt higher than it was a month ago, but stocks are acting like we are in a full financial crisis right now. Just remember, stocks take the escalator up, but the elevator down and that elevator is headed down pretty quickly right now," the strategist added.
"At the same time, a lot of negativity is priced in right here and should we get any good news on the economic front, a big bounce back could be quite possible. With earnings season about two weeks away, that could be the next big driver that shows the economy isn’t as weak as many claim,” he said.
Stocks have had a 14% peak-to-trough correction in an average year since 1980, with 23 of the past 44 years down at least 10% from the highs at some point during the year, Detrick noted.
"The good news is 13 of those years finished higher and by 17% on average," he said. "We aren’t minimizing the rough start to this year, but after not having a 10% correction since October 2023, the truth is we were due for some type of volatility and early in a post-election year tends to be volatile.”
The S&P 500 was down about 4.8% at the market close, while the Nasdaq was off nearly 6% and the Dow Jones Industrial Average was down almost 4%.
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