The Bull Market’s Days Are Up – Prepare for the Dip

So it would appear that President Trump was serious about imposing tariffs on Canada, Mexico, and China after all! And it would also appear that stock market investors are not thrilled with the idea.

With the S&P 500 down 5% since its peak on February 19, and the Nasdaq down more than 7%, the past several days haven’t been a whole lot of fun for investing in growth stocks, or any stocks really. Investors in some of the “Magnificent Seven” stocks have been hurt worse than most, with Nvidia (Nasdaq: NVDA) shares for example down 16%, and Tesla (Nasdaq: TSLA) falling off a proverbial cliff, down 23% in 10 days.

Automakers beyond Tesla don’t know which way to turn, either. As recently as Tuesday night, shares of Ford (NYSE: F), General Motors (NYSE: GM), and Stellantis (NYSE: STLA) were all down with the rest of the market. Only a last minute reprieve on car import tariffs against Canada and Mexico helped to lift Ford and GM shares on Wednesday. Poor Stellantis stock is still down despite the reprieve. And when you consider that the President’s action actually looks more like a temporary stay of execution rather than a pardon (because the auto tariffs were only suspended for a month), investors are probably not out of the woods yet. What can change for the better one day, after all, can just as easily reverse and change for the worse the next.

All of which is to say, uncertainty reigns in the stock market today. The bull market’s days are up, there’s a bear market scratching at the door, and if you’re smart, now’s a good time to start preparing for the next dip.

So how should you do that?

Avoid anything that might get touched by a tariff

My first advice on that score should probably be filed under the rubric: “Easier said than done.” And it’s to avoid any stocks that seem likely to be affected by President Trump’s tariffs.

This is no easy task, because as we saw this week, tariff policy can change on a dime, and what’s at risk one day could become safe the next… only to turn risky again one day later. The simple truth of the matter, I fear, is that there’s no real way to be certain where tariff policy is headed. Especially not now that the President’s has his eye on a “reciprocal tariffs” policy, which means any country that imposes a tariff on Product A, when exported from the U.S., may see imports of its own Product A to the U.S. hit with an equal and opposite tariff.

The network of tariffs on various goods across various countries, all around the globe, is simply too complex for you to know how that’s going to shake out. I mean, you can try. You can focus your investments on things that don’t cross borders in physical form, like computer software from Microsoft (Nasdaq: MSFT) or Internet clicks from Alphabet (Nasdaq: GOOG).

Then again, Microsoft stock is down 2% over the last couple weeks, and Alphabet stock is down 6.5%, so you can see how well that works out in practice!

Buy value stocks, not growth stocks

Honestly, probably the best advice I can give you is the same advice I’d give you in any market: Buy the best companies you can, at the prices that seem fairest, and let the tariff chips fall where they may. That’s really the most practical way you can limit your risk in a shifting economic environment such as the one we find ourselves in.

Which companies specifically?

The good news here is that right after a stock market selloff can be a great time to find such bargains. Running a screen for value stocks costing less than 15 times earnings and selling for a PEG ratio of less than 1.0 tonight, for example, produces a whole series of brand names stocks that might be worth a look:

American Airlines (Nasdaq: AAL) looks attractive at 12.7 times trailing earnings. Citigroup‘s (NYSE: C) even cheaper at 12.3 times earnings. Ryder System‘s (NYSE: R) not much more expensive at 14.1x. Unless you think Americans are going to stop traveling, banking, and moving stuff from Point A to Point B just because of a bunch of tariffs, these three stocks are probably going to come out of this trade war just fine, so long as you have the patience to wait out the storm.

Long story short, even in a bear market, the bargains are still out there. You just need to look for them.

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