So I wrote an update on this in the weekend personal portfolio update that went out yesterday.
But this is the probably the biggest topic for investors right now, and I wanted to spend some time to discuss in further detail.
This is an FH Premium post written on Monday 10 March.
I am making this available to all readers to keep you updated on my latest thinking given the current market sell-off.
If you find content like this helpful, do consider subscribing for FH Premium.
You will also get access to my latest macro views, full stock / REIT watchlist, and personal portfolio (updated weekly).
How bad could the short term sell-off get? Surveying the short term price action
Let’s start by looking at latest market pricing.
AI looks like a disaster
AI stocks which have been the poster boy of the rally the past 24 months are breaking key supports – suggesting strong profit taking / deleveraging from insitutional players.
Coherent for example, breaking all key supports and trading back to mid 2024 levels:
Meanwhile NVIDIA also has broken below all key moving averages, back to mid 2024 levels:
Crypto looks especially bad
The lower liquidity environment has not been good for Crypto as well.
Both Bitcoin and Crypto generally do not look good:
Big Tech is not looking too great
Big Tech too is not doing well, erasing much of the post-Trump rally:
Even the relatively stronger names like Meta and Amazon have also been sold:
Meanwhile Tesla is down almost 50% from highs:
Other sectors
Economically sensitive Russell 200 looks terrible:
US regional banks sitting right on the 200DMA:
Even Biotech is getting hammered – back to May 2024 levels:
Meanwhile the USD had a sharp depreciation last week (due to market pricing in more rate cuts).
While long term interest rates remain well anchored around the low 4% range.
Stocks look oversold here
For what it’s worth – US stocks are in oversold territory here, so we may see a short term bounce from oversold conditions:
What is driving the macro sell-off? What happens next?
The more tricky question is what happens next.
There’s a decent chance we get a bounce in the days / weeks ahead.
What happens after that?
Do we go on to new highs? Or do we make lower lows first?
That’s really the million dollar question here.
The crux of how I am seeing this is summarised below.
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What is driving the macro sell-off?
Post Trump election – markets expected a lot of stimulus and money printing, and stocks priced that in accordingly.
But look at the reality of Trump’s first 2 months, and it’s fairly clear we have not seen that (look at DOGE cuts and tariffs).
Instead of liquidity in the form of tax cuts or increased government spending.
We instead got lower liquidity in the form of DOGE spending cuts, and tariffs.
Given stocks were pricing in a very optimistic macro outcome, some disappointment was in order.
What is Trump’s strategy here?
Because the sell-off was somewhat due to disappointment over trump policies.
To answer the question of what happens next requires some understanding of (a) why Trump is doing what he is doing, and (b) what is his game plan.
Now this next part ventures into my personal opinion, which for obvious reasons could be wrong.
The way I see it – is that Trump is happy with some short term pain, if it sets up the US economy for mid term gain.
If I am right, the high level strategy may broadly be:
1. Cut government bureaucracy and expenses via DOGE (less government bureaucracy sets the stage for mid term innovation and animal spirits)
2. Tariffs create short term uncertainty, but result in other countries being forced to invest in the US or drop reciprocal tariffs against US
(Ie. 1 and 2 trade short term pain, for potentially mid term gain)
3. Because inflation is not a problem, long term interest rates remain well anchored (remember a key fear of the Trump presidency was always that long rates would blow out – with recent actions this is much less of a concern)
4. Because inflation is not a problem, and instead the primary fear shifts towards weaker economic growth – the Feds are forced to cut short term interest rates more than what is priced in (this is being priced in as we speak with 3 cuts priced in for 2025)
- This leads to a weaker USD, which boosts US exports (look at the sharp drop in USD this week)
6. Short term pain aside. Mid term – this results in less government bureaucracy, lower rates, weaker USD – setting US economy up for strong growth in the mid term
Am I right on the above?
Like I said, the above is my personal view, and I could well be wrong.
And based on what new evidence comes to light from Trump / Bessent / Powell in the days ahead, I could well change my mind.
But the recent comments from Trump and Bessent suggesting that the administration looks more at long term interest rates than short term interest rates.
And Bessent coming out last week with the following comments:
“Look, there’s going to be a natural adjustment as we move away from public spending to private spending,”
…
“The market and the economy have just become hooked, and we’ve become addicted to this government spending, and there’s going to be a detox period.”
Lend some credence to my theory above – that the Trump administration is prepared to accept some short term pain, if it sets the US economy up for mid term success.
But like I said, I could be wrong.
Sharing my views on what happens next?
Given how oversold stocks are – I still think there is a decent chance we get a short term bounce.
What happens after that, is more tricky – as it depends on reaction from policy makers (key players being Trump, Bessent (Treasury), Powell (Fed), and how other countries respond to Trump).
Some of you have asked for updated probabilities on the various outcomes.
Based on what I know today, I would assign them broadly as follows:
1. Goldilocks (real growth) – 50%
2. Recession/bear market/Stagflation – 30-40%
3. Melt up – 10 – 20%
Stagflation odds are definitely down because with lower government spending – inflation is no longer as big a concern in my view. Oil prices are also likely to remain well anchored given excess OPEC+ supply.
Bigger short term risk is slower economic growth due to tariffs / DOGE cuts, which are not offset by higher govt spending or tax cuts.
Of course, the above is based on what I’m seeing today. If Trump changes position on tariffs / govt spending / stimulus, probabilities will change.
So base case I still think things turn out okay. But the probability of something going wrong has definitely gone up – and you already see that reflected in stock pricing.
That said if the downside materialises, US stocks are at pretty lofty valuations (I have been saying this for a while), so there could be quite a bit of downside.
What would I buy/sell with my own portfolio?
As shared above – stocks look pretty oversold here, so we may see a short term bounce.
Some US names look decently attractive after the sell-off, so I may add to some positions depending on how price action plays out (see the Stock Watch for the names I am keen in and rough target pricing).
But assuming we get a bounce – whether its a dead cat bounce or a rally to new highs is genuinely not clear to me at this point in time.
It all goes back to what Trump wants to do, and my gut feel here is that Trump is happy with a little bit more short term pain near term.
So some caution is warranted here, although it’s usually never a bad idea to buy on extreme fear as long as you can take the downside and have holding power.
I share weekly updates on what I am buying/selling in my personal portfolio on FH Premium.
China / REITs look decently attractive to me
Outside of the US – I also like China/REITs at the moment.
Let’s discuss each briefly.
Will I buy China stocks?
China is quite uncorrelated to the rest of the world, and the more tariffs pain, the more Beijing may be forced to stimulate domestic consumption.
Assuming Beijing does not overregulate (and yes that is a big if), then I could see the China AI wave from Deepseek really benefitting players like Alibaba, Tencent and Bytedance (Bytedance is not listed).
Will I buy REITs?
On REITs – if growth is slowing and rates are coming down, that could benefit REITs. And I see decent value in REIT prices today (but focus on picking the blue chips).
Look at US REITs performance of late, and the performance could not be more different from Singapore REITs. This discrepancy does not really make sense in my view, which presents opportunity.
In the event that the downside scenario materialises, the slower US economic growth will translate into lower interest rates, and that could benefit REITs.
S-REITs trading at prices close to 2024 lows when interest rates were much higher and the outlook for rates much more hawkish, does present opportunity in my view.
I’ve charted US REITs (candles) vs Lion-Philip S-REIT ETF (red) below.
And you can see that while US REITs have rallied in 2025 – S-REITs have not.
This presents opportunity to me.
And you can see the list of REITs / China stocks / US stocks I am keen to pick up shared on FH Premium.
This is an FH Premium post written on Monday 10 March.
I am making this available to all readers to keep you updated on my latest thinking given the current market sell-off.
If you find content like this helpful, do consider subscribing for FH Premium.
You will also get access to my latest macro views, full stock / REIT watchlist, and personal portfolio (updated weekly).