“We will need to get used to the idea that the chances of a ‘good’ trade deal have decreased significantly and it will possibly not even get done,” said Tocchio at Heron Asset.
The timing is not ideal. Economic barometers worldwide have showed signs of softening, with data on Thursday showing a gauge of U.S. factory activity dropped to a nine-year low. Beyond chipmakers, other companies also seen as proxies for growth have been struggling, leading the weekly drop.
If fears for the economy are increasingly visible in stock market, in the commodities market they are blinding. The Bloomberg Commodity Spot Index slumped the most since January on Thursday on its way to the worst week this year.
As raw materials slide, it has switched on another warning light for equities. The so-called boom-bust barometer created by Ed Yardeni at Yardeni Research peaked in mid-April and has sunk since. It tracks the ratio between industrial materials prices and jobless figures.
To all of this, throw in a stream of idiosyncratic negative news. Qualcomm Inc. shares tumbled after a U.S. judge ruled that the company violated antitrust law. Wall Street turned on Tesla Inc. Ford Motor Co. announced plans to slash jobs. French retailer Casino Guichard-Perrachon SA was whipsawed as its parent finally succumbed to restructuring.
And the political dramas continue. House Speaker Nancy Pelosi and Trump exchanged increasingly direct insults this week, though for now she appears to be keeping impeachment off the table. Brexit claimed the scalp of British Prime Minister Theresa May at last, once again plunging the country into limbo.
None of this is to say markets are yet in a panic. Recent price declines have encouraged some money managers to buy knocked-down names. Having reduced its equity exposure in April, Tocchio said Heron Asset has started buying again. UBS Global Wealth Management said Thursday they’re overweight global equities versus high-grade bonds, albeit with put protection on the S&P 500.
“Investors should be braced for more turbulence, though not in our view tactically positioned for doomsday just yet,” said Will Hobbs, chief investment officer at Barclays Investment Solutions in London.
What the litany of macro risks does mean is a chance for stock pickers to shine. Goldman Sachs said this week that mutual fund managers held fewer stocks with China exposure at the end of March than was suggested by benchmarks, helping them boost relative returns in the selloff.
As the laundry list of worries grows, they may get plenty more opportunities to outperform.