Selloff Reactionary to Market Froth, Schwab's Sonders Says

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Transcript

00:00Romaine has made the point throughout the program, and the more I hear it, the more I start to believe it,

00:04that it's interesting and surprising to see this degree of a sell-off,

00:08given that we've been in this situation before where you have President Trump tweet something on Truth Social,

00:14things get rattled, and then dip buyers come in. It didn't exactly play out that way today.

00:20Well, Katie, you know what the difference might be?

00:22You know, in this type of environment, it's very hard to anticipate in advance what the next social media post might be.

00:28We know that tensions continue to escalate here, but I think the issue is the setup.

00:34So if you think back to that intraday low on April 9th, the setup at that point was the opposite of what we experienced today,

00:43where markets were way oversold, breath had been washed out, sentiment was utterly despairing.

00:48So you got this, what was really just incrementally positive news with the 90-day delay.

00:53I'd say we have completely the mirror image of that now.

00:56The setup going into this was one of, at best, complacency.

01:02At worst, just a heck of a lot of froth, concern about the bubble, but sort of full steam ahead.

01:09Unbelievable speculative froth in certain smaller segments of the market.

01:14So you get this news today, and the setup was one of complacency and froth,

01:19and therefore the downside is more reactionary.

01:23So I think that's the way to think about this kind of market backdrop.

01:25When we talk about the fundamental nature of what potentially these additional tariffs can mean,

01:32or the idea that maybe Trump would back off on them, Lizanne, is there any sense here that

01:36that would actually only really affect the small cohort of stocks out there,

01:41rather than this sort of broad-based sell-off that we saw today?

01:45Well, you're certainly seeing today the aim more at the tech area, China-exposed names.

01:54But we have to think, you know, China is a major supplier, obviously, of rare earths and advanced materials.

01:58And that's not just things used in semis, but EVs and defense.

02:03And then it brings back concerns that are almost COVID-like concerns about major supply bottlenecks.

02:10We're already dealing with higher input costs just from the ongoing tariffs even prior to today.

02:18U.S. imports from China are down about 30 percent year-to-date, but China is still the fourth largest import source.

02:25So there is still meaningful exposure, and it's exposure that spans beyond just the kind of tech ecosystem.

02:34And then we have to start to wonder about now if the meeting at the end of the month is indeed canceled,

02:42do the 145 percent tariffs get put back in place?

02:45The current truce, I think, expires second week in November.

02:50So there's, as Joe Matthew pointed out earlier in your show, there's lots of plates in the air that are spinning right now.