The recent selloff, particularly in tech, has certainly rattled cages. We’ve seen a significant drop, the kind that makes even seasoned traders sit up and take notice. The concern stems from a confluence of factors: anxieties about the White House’s economic policies, specifically regarding fiscal and trade goals, and the potential for these policies to trigger economic headwinds.

However, it’s crucial to distinguish between market sentiment and hard economic data. While fear is palpable, and risk premiums have indeed surged, the credit market, a key indicator of economic health, hasn’t yet shown signs of a major breakdown. Moreover, fundamental economic data, such as labor reports and corporate earnings, are still relatively robust.

This divergence suggests a market grappling with uncertainty rather than facing an imminent economic collapse. The decline is disproportionately affecting high-valuation, speculative assets, which is often the case during periods of increased volatility.

Once the S&P 500 dips below the 5,500 threshold, opportunities may arise to buy into US tech and financials. However, it’s essential to remember that this is a dynamic situation, and market conditions can change rapidly.

One significant shift is the adjustment of market expectations. At the beginning of the year, there was widespread optimism regarding tax cuts and deregulation. However, policy uncertainty has tempered this enthusiasm. Despite this, some firms still maintain a bullish outlook, with projections indicating a potential 14% upside for the S&P 500 by year’s end.

It’s also worth noting the discrepancy between survey-based measures and hard data. While surveys may reflect heightened anxiety, actual economic indicators, such as jobs reports and earnings, remain relatively solid. This suggests that while concerns exist, the underlying economy is still functioning.

Given the current climate, investors should consider moderating their equity exposure in favor of high-yield bonds. Diversification is also crucial. Exploring opportunities outside the US, such as in China and Japan, and reevaluating positions in Europe, can help mitigate risks.

Looking ahead, while sell-side strategists are tempering their 2025 forecasts, the bullish sentiment hasn’t entirely disappeared. Areas like artificial intelligence and electrification still present potential for growth.

In essence, we’re experiencing a slowdown, not a cliff. The market is adjusting to policy uncertainties, and while volatility may persist, opportunities exist for those who approach the situation with caution and strategic diversification.