Why I'm 'sitting tight' amid the negative news flow

During times of market turmoil, it's critically important to keep a clear head and a long-term perspective.

That's easy to say... But it's hard to do when we're bombarded by a 24/7 news cycle, which tends to reinforce the prevailing narrative in the financial media. And that narrative is generally negative these days.

Take a look at just some of what has come across my screen...

First up are these charts from the Financial Times. As you can see, the Economic Policy Uncertainty Index has hit all-time highs – both in the U.S. and globally:

When it comes to the tariff situation, China could retaliate against us by targeting services, where we run a big trade surplus with the country.

Take a look at the chart in this post on social platform X from Charles Schwab's Chief Investment Strategist Liz Ann Sonders:

Turning to this Bloomberg chart from another post on X, the percentage of American subprime auto borrowers falling behind on their car payments is at an all-time high:

Meanwhile, these charts from the Financial Times show that the number of European tourists to the U.S. has plunged:

And it's not just Europeans who are souring on the U.S. Here's an e-mail I received from Canadian reader Matthew C.:

The biggest problem that the USA is facing is not the impact of tariffs, though that will be painful.

Rather it is how Trump has damaged, if not destroyed the reputation of the US as a fair and honest place of business and a reliable trade partner. This has been destroyed and will take a much longer time to recover if ever.

Speaking for myself and many of my other Canadian friends, we are actively searching out alternatives to American products, produce and companies.

I will no longer buy a US made product if at all possible and will take my business to a company not owned by a US entity. In addition there is no hope of any of us vacationing in the US any time in the foreseeable future.

This has a much more long term and lingering impact than simply tariffs and I think is massively understated and misunderstood by the US media.

In his latest Week in Charts blog post, Creative Planning's Charlie Bilello shared this chart showing that the Federal Reserve Bank of Atlanta forecasts that our GDP shrank 2.4% annualized in the first quarter:

And consumer sentiment is terrible, whichever way you measure it...

As Sonders shares in another post on X, only 35% of consumers expect to see real income gains during the next year – close to a quarter-century low:

And courtesy of these charts from the Financial Times, here are four more negative indicators that are at their all-time worst levels:

Lastly, the University of Michigan Consumer Sentiment Index, which dates back to 1952, has crashed to the second-lowest reading in the survey's history (chart courtesy of Bilello's latest Week in Charts):

So why am I not telling my readers to sell everything and hold cash, which is paying a decent 4%-plus interest rate right now?

First, as I've argued previously, almost all of the pain and uncertainty is self-inflicted. That means most of it can – as we saw last week – be mitigated with a social media post/announcement.

And second, it's precisely when investor and consumer sentiment is the worst – and volatility is the highest – that stocks tend to do the best.

Here's one example of this, showing that the University of Michigan Consumer Sentiment Index is actually a brilliant contra-indicator (chart again courtesy of Bilello's latest Week in Charts):

So do I think the S&P 500 Index is likely to rally 18.7% in the next year – the average of what it has done in the past when consumer sentiment is in the bottom 5%, as it is today?

No...

If you look at the chart over the past 73 years, most of the other times sentiment was so bad (mostly amid the stagflation of the 1970s and during the 2008 global financial crisis) stocks were cheap... unlike today.

So investors should have modest expectations and prepare themselves for plenty more volatility and negative news flow.

But my "spidey sense" isn't telling me to either buy or sell across the board, so I continue to believe that sitting tight remains the best course.

Best regards,

Whitney

P.S. I welcome your feedback – send me an e-mail by clicking here.