Sell the Rips! Is the Market About to Plunge into the Depths of Mordor?!

A Shadow Lengthens

Hark my friends! Gandalf the Grey here with tidings that may chill even the stoutest hobbit heart. I've been peering into the Palantír or well reading Bank of America's latest pronouncements and the signs are… troubling. Their top market expert this Michael Hartnett speaks of selling into market strength. Until further notice! It seems the whispers of President Trump's tariffs are causing quite the unease and like the Ents preparing for war they suggest waiting for policymaker action before committing more coin to the fray. Fly you fools! Before it's too late.

One Does Not Simply 'Buy the Dip'

Hartnett in what he calls his 'weekly client note,' (a modern day scroll I presume) advocates 'selling the rips.' 'Sell the rips!' he cries. It has a ring to it doesn't it? Almost like a battle cry. He also suggests being long on the 2 year Treasury note despite the recent jump in yields and going short the S&P 500. It seems he's anticipating a storm a proper economic deluge! One does not simply 'buy the dip' in these circumstances you see. It's more akin to wading into the Dead Marshes – a fool's errand indeed.

Decoding the Prophecy: A Riddle Wrapped in an Enigma

Now this Hartnett fellow speaks in riddles much like Elrond in his council. He speaks of waiting for the Federal Reserve to cut rates the US China trade war to ease and the US consumer purchasing power to rise. He seeks a sign a glimmer of hope amid the gathering darkness. When will these events occur? Alas the Palantír is murky on the details. But he sees 4,800 on the S&P 500 as a good reentry point. He must be joking! That would be like saying 'Mordor will be a lovely place when Sauron redecorates'. Preposterous!

Insanely Bearish or Just Plain Sensible?

He notes that sentiment indicators show investors are 'insanely bearish.' Insanely bearish you say? I call it prudent! Even a wizard knows when to seek shelter from the storm. Bank of America expects any recession to be 'short/shallow,' eased by Fed rate cuts. Well let us hope they are right lest we find ourselves facing not a mere economic hobbit hole but a full blown dragon's lair!

Political Perils and Corporate Capitulation

Ah but the political risks remain! Trump's approval rating is falling and Hartnett fears that a loss of political capital could jeopardize the ability to cut corporate taxes in the second half of the year. 'Latter would cause last bulls to capitulate,' he warns. It seems even the bravest Rohan steeds might balk at such a precipice!

The Wizard's Wager: A Portfolio for Perilous Times

So what is a wizard to do? Hartnett recommends long dated U.S. corporate bonds dividend paying stocks and assets that benefit from U.S. dollar weakness. A cunning plan though perhaps a bit… boring even for a hobbit. Myself I'm considering investing heavily in lembas bread and a good walking stick. One never knows when one might need to make a hasty retreat! Remember my friends 'All we have to decide is what to do with the time that is given us.' Choose wisely.