Need to Know: Here’s why buying the Cohn dip may be better than selling the panic


Yet another risk-off day is in the offing, as trade-war worries just got a reboot.

Stocks are looking to bleed out at the open after the resignation of top White House economic adviser Gary Cohn and questions over his replacement. That has left investors feeling pretty raw and maybe a bit vulnerable.

Talk of U.S. tariffs on China and possible EU retaliation likely won’t help calm the situation.

Here’s a taste of some of the gloom: “I’ve gone from being a little bit relaxed about the trade-war thing to being quite a lot more nervous,” says Kay Van-Peterson, Saxo Bank global macro strategist. “People are not giving it as much weight as they should be … I don’t think people are really thinking this through.”

Michael O’Rourke, chief market strategist at JonesTrading, says markets are right to mourn the loss of “the president’s most credible and capable adviser” and driver of the administration’s business-friendly economic policy. He says look out, as a “potentially dangerous” protectionist wall is being built.

Read: Meet Peter Navarro, the man who pushed Gary Cohn out of the White House

It’s going to be easy to go with fear today — but then again, take a moment to remind yourself of this Teflon-esque market’s qualities. Since Trump’s election, the S&P 500 has only had two down months, as investors have become adept at shaking it (bad news) off. And some say trade-war fears are simply overblown.


S&P 500 monthly performance over the past two years

“Ridiculous,” is what The Real Fly has to say about stock futures plunging on yet another exit from the White House.

“What’s important to note was Gary’s initial motive for joining Team Trump — being able to easily divest ~$250 million in Goldman stock, plus getting the opportunity to scratch working inside the Oval Office from his bucket list,” he said.

Our call of the day from Cresset Wealth Advisors’s CFO Jack Ablin says if the market keeps taking the Cohn news badly, it’s probably a near-term buying opportunity.

“I wouldn’t read too much into it. I think Gary Cohn may have left not because he thought tariffs were imminent … it was really more of an issue with alignment of rhetoric,” he says in an interview with Reuters, explaining that Trump probably wanted to avoid dissension in the ranks.

Meanwhile, Doug Cote, chief market strategist at Voya Investment Management, also believes the market is overreacting and suggests it’s time to buy the dip.

“Sorry to lose him, but life goes on,” he says.

Key market gauges

Dow DJIA, +0.04% , S&P 500 SPX, +0.26%   and Nasdaq COMP, +0.56%  futures are all down about 1%. Europe SXXP, -0.07%   stocks are seeing some modest losses, while Asia stocks closed in the red.

Oil prices CLJ8, -0.48%  are down ahead of U.S. supply data due later, and the dollar DXY, +0.18%  is also off a bit. Gold GCJ8, -0.25%  is pretty flat.

Check out Market Snapshot for more on today’s action.

Bitcoin BTCUSD, -1.78%  is hovering at around $10,500.

Read: Coinbase launches its first index fund for cryptocurrencies

The chart

Vanguard’s chief economist Joseph Davis is brushing aside worries about a “Stockmaggedon” . That’s the scenario where baby boomers sell stocks as they retire, while millennials — burdened by student loans and fearful of past stock bubbles — avoid equities altogether.

In a blog for the investment advisor, he offers up plenty of reasons why this won’t happen. One is the fact that the boomer generation spans 20 years. Another is that millennials haven’t lagged in the 401(k) enrollment department, and their debt rates have been declining.

In any case, here’s Davis’s don’t-worry-about-the-boomers chart:


Click here to read the whole blog.

The quote of the day

“We can also do stupid.” — That was Jean-Claude Juncker, head of the European Commission, commenting on Trump’s steel and aluminum tariff plan.

That threat of trade retaliation came closer to becoming reality after EU trade official Cecilia Malmström stepped up today to say a provisional list of tariffs on U.S. imports was being circulated around the EU.

Trump likely kicked off some irritation in Europe with this weekend tweet.

The buzz
Getty Images

Gary Cohn has left the White House.

Stocks exposed to prices of metals and international trade are seeing a little pressure premarket as trade-war worries ramp up. Caterpillar CAT, +1.74%  and Boeing BA, -1.09%  are each off around 2% in premarket.

Meanwhile, Goldman Sachs GS, +1.45%  is down 1.1%, which some say is linked to the fact Cohn is a former GS executive.

For the first time in its 125-year history, Coca-Cola KO, +0.09%   is planning to sell an alcoholic drink — a sparkling drink in Japan with a local spirit.

Amazon AMZN, +0.92%  CEO Jeff Bezos has grabbed the top spot on Forbes World’s Billionaires list, with a net worth of $112 billion. He ousts Microsoft MSFT, -0.34%  co-founder Bill Gates, who’s now at No. 2. Berkshire Hathaway BRK.A, +0.82% BRK.B, +0.64%  CEO Warren Buffett is ranked third.

Twitter TWTR, -0.43%  CEO Jack Dorsey has pledged to crack down on cryptocurrency scams (h/t Coinbase). Here’s his response to a complaint by a Cornell professor.

The economy

Ahead of Friday’s nonfarm-payrolls data, we have ADP employment numbers today. Updates on the deficit, and productivity and unit labor costs are out ahead of the open, while the Beige book and consumer credit are later arrivals.

New York Fed President William Dudley will give a speech in Puerto Rico, and Atlanta Fed President Raphael Bostic will appear in a “fireside chat.”

The stat

Drunk shopping — won’t somebody think of the cats?

$448 — That’s how much Americans, on average, splashed out on shopping while drunk last year. That’s nearly double the inebriated spending in 2016, and equates to billions of dollars nationwide. Food, shoes and clothes are the most common purchases, but it’s men more than women doing the buying.

But hey, just because you’re boozed up, doesn’t mean you can’t make a few good financial moves.

Random reads

Stormy Daniels says that hush deal was null — she’s suing POTUS.

Watch out, East Coast. A powerful nor’easter is headed your way.

“House of horrors” teen was secretly posting YouTube videos before her escape

Doctors dish on Reddit about failed DIY medical treatments they’ve seen

When plastic furniture goes bad

Fyre Festival fraudster is looking at a 10-year prison rap

What’s in a 132-year old message in a bottle

Need to Know starts early and is updated until the opening bell, but sign up here to get it delivered once to your email box. Be sure to check the Need to Know item. The emailed version will be sent out at about 7:30 a.m. Eastern.

Follow MarketWatch on Twitter, Instagram, Facebook.