Welcome to Q2, during which traders who might have been in high school for Lehman will attempt to come to terms with the sudden reemergence of volatility and with the reality of two-way markets more generally.
If you took a break from the news cycle over the weekend, good for you. But you should know that while you were giving your “very good brain” some much needed respite, someone else’s “very good brain” was imagining that Amazon is running a “scam” on the Post Office. That’s not great news for the shares which are coming off their second consecutive week with losses of 3% or more. As noted in these hallowed pages on Thursday, one thing U.S. equities do not need amid the Facebook drama and in the midst of ongoing trade jitters is a hobbled Amazon that’s taking fire every morning in the premarket from the presidential Twitter feed.
Meanwhile, Tony Stark was busy joking about Tesla going bankrupt following one of the worst months for the company’s shares in history. To be fair, I’d probably be laughing if I was him too, because after all, at the end of the day he’s Elon Musk and you’re you and that’s a laughable juxtaposition on all kinds of fronts.
But pride comes before the fall and when it comes to people who fit the Icarus mold, Elon is literally flying closer to the sun than the rest of us. Tesla shares were off sharply in the premarket to start the week, and although there are some folks out defending the stock on Monday, the bad news continues to pile up. The Model S recall didn’t help and jitters about Q1 deliveries weighed as well.
Philippe Houchois over at Jefferies is feeling a little better about things after the recent selloff, upgrading the shares to hold from underperform. He thinks there’s “a high probability that management and the board will take more drastic action on guidance and funding to restore credibility.” Baird’s Ben Kallo claims production delays are “priced in” and thinks recent turmoil has created a “buying opportunity” for long-term investors. Of course “long term” only applies if the company survives in the “short term”, and for some folks, the jury is still out on that.
Meanwhile, you’ll forgive everyone for being worried about the future of global trade and commerce. Over the weekend, Trump suggested that if Mexico allows a “caravan” of migrants from Honduras to make it to the U.S. border he’ll “cut off [the country’s] cash cow“, and by “cash cow” he means NAFTA.
That’s not generally the kind of tweet that fosters good will in trade negotiations and if Xi were capable of having more than one facial expression, I’m pretty sure he would have rolled his eyes when he was informed that his counterpart in the U.S. spent Easter Sunday tweeting about dismantling complex trade agreements because 1,000 Central Americans are on the march. China’s retaliatory measures adopted in light of the steel and aluminum tariffs announced by the Trump administration last month went into effect on Monday. Someone find Maria Bartiromo – we’re gonna need more “big beautiful” chocolate cake.
All of this marks a rather inauspicious start to Q2 – especially considering it comes on the heels of a Q1 that saw the S&P post its first quarterly loss since 2015.
The bottom line this week is that if you’re looking for market leadership, you might have to look somewhere besides tech.
And if you’re looking for leadership more generally, you might need to look somewhere besides Washington.