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Opening Statement from the June 2019 Intelligent Investor (part 1)

Originally published on June 5, 2019 (pre-market release)

Market Overview

In the March 2019 U.S. Market Forecast (check the 21-minute mark) we discussed that until a trade deal was struck we expected the Dow to trade roughly between 26,000 and 24,000/24,500.

We also mentioned that although the Dow could rise above 26,000 we did not believe it would hold this level given trade uncertainty, unimpressive earnings and weakness in the global economy.

We also mentioned that investors could target position entries after a bounce in the Dow off of the 25,000 support. The following trading day the Dow did in fact bounce off of the 25,000 support and would rise to above 26,650 over the next five weeks.

In the April U.S. Market Forecast (check the 18-minute mark) we discussed that investors should generally not be buying or reentering positions. Instead, we advised investors to be patient for a selloff down to the same mid to low-24,000 region we had discussed in March.

In the May 2019 U.S. Market Forecast (check the 14-minute mark) we concluded that we were expecting lower levels in the U.S. stock market. We also stated that if adverse developments related to trade negotiations arose the market could sell off to the low-24,000 region we had been discussing since March.

Recently and without any warning, Trump announced plans to begin placing tariffs on all Mexican imports starting at 5 percent, and gradually increasing up to 25 percent. Even more surprising was that he threatened to impose these tariffs in order to pressure the Mexican government to do a better job preventing migrant caravans from South and Central America from moving into Mexico en route to the U.S. This certainly qualified as an adverse development in trade negotiations and thus led to a large selloff in the U.S. markets down to a low of 24,689 in the Dow. This was the time when investors should have begun buying. Since then the market has rallied.