Last week’s note focused on time in the market rather than attempting to time the equity market as such. Fast forward to this week and we have another round of negative short-term headlines and negative short-term equity price action. To me, this is another classic example of when we should be using broader equity index weakness as an opportunity to top up on the highest quality businesses.
Quality is rarely on sale, in fact, it only happens for short periods in times of broader market weakness. That is why I am actually quite excited about “Tariff Man” (aka President Trump), remerging as a dark figure this week because it will give me a chance to deploy cash into great businesses with a margin of safety.
Clearly the markets believed that a “stage 1 “ trade deal was done. They had bid up deep cyclical and value equities, and sold lower beta defensive equities to fund that “risk on” rotation. This week we have seen that reverse with China facing cyclical stocks retreat, led by the miners, heavy machinery manufacturers, aircraft manufacturers, energy and transportation.