Here we go again with more tariffs and on Friday, we also got a very weak jobs report. The markets reacted as they should have, especially after a rip-roaring record setting month of July that stocks enjoyed. On Friday the Dow Jones Industrial Average (see chart here) fell over 500 points, the S&P 500 (see chart here), the S&P 500 (see chart here) dropped over 100 points, the Nasdaq Composite (see chart here) fell over 400 points and the small-cap Russell 2000 (see chart here) closed the month of July down 45 points.

Now let’s add some perspective to this. The stock market has been on a tear since the bottom in April (see last month’s blog here). The markets not only recovered all its losses from the initial tariff fiasco earlier this year but went on to make all-time highs yet again in July. However, as the tariff deadline of August 1st loomed in the background, all heck broke loose with an expanded version of these tariffs in some instances along with a dismal jobs report that was also issued on Friday. Hence, a noticeable market sell-off ensued. To me all this heated market needed was a reason to sell-off and it got that on Friday.

Now looking ahead, where do we go from here? We needed a healthy market pullback for the uptrend to continue. Market participants have become so used to seeing markets going up and up with no end in sight. This is an unrealistic expectation and without healthy pullbacks, the market could set itself up for an outright crash which nobody wants to see. Now I don’t like what I saw in the jobs report, nor the increase in tariffs, so now I think the Federal Reserve may soon have enough data to start lowering rates. This is what the markets want to see and that might be the case sooner than later.

From a technical point of view, the aforementioned indexes finally came out of extreme overbought conditions according to the relative strength index aka the RSI to where now there could be some select opportunities to consider.

Good luck to all 🙂

~George