Why 'buy the dip' is still the winning playbook before earnings season

we are watching, uh, of course all things tariffs. Now, this is an issue that for the past month and a half, I would argue investors have forgotten about, sending stocks to record highs. Now that it's back in the discussion, what might trading look like in the very short term?

On a near-term basis, you can't overlook the prospect of a little bit of a pullback when you look at the technicals for the broader market. Around 20% of index constituents are overbought based on a momentum indicator that we look at. That's near the qualifier where you tend to get a pause or pullback in price action. We've had obviously an impressive run in terms of just the rate of change we've witnessed since April. So maybe the uncertainty ticking higher with some of the brick announcements and just the July 9th headline could weigh on equity market momentum on the near term, but I do think it is a buy the dip market right now.

Why is it buy the dip, Adam? And I ask that because from what we have seen, uh, on the tariff front, it still looks like tariffs will continue to be in place. And as we're on the cusp of earning season, uh, what company wants to see tariffs in place?

Good question. I, I think when, from the market's perspective, the White House has shown some flexibility on these tariff deadlines and the tariff rates. So for now, that seems to be the playbook and we're sequencing more toward trade deals, not the sticker shock from liberation day. And on the earnings front, here I am a technical analyst talking about earnings, but I would have to call it a catalyst. We've had pretty big downward revisions going into reporting season. I think it does set up for a low bar for earnings, around 5% earnings growth. That's down from about 9% expectations. So larger than expected cuts, I do think it could bode well for a beat. That tends to be the playbook in terms of quarterly earnings. We'll see how big that beat is, but I think right now a pretty good setup when you have solid earnings, decent enough economy, and pretty good momentum in the market.

Ally, at the top of the show, you talked about Amazon, and I think Amazon is the perfect tariff proxy. This stock has pretty much done nothing, hasn't really participated in this record setting rally. What's the message from that, uh, in your view?

Yeah, and if you look at some of those other mag seven names like Nvidia, Microsoft, they've seen these outside gains, but Amazon has really struggled here. And I think it points to this consumer that is a little nervous about the trajectory of the economy. Right now, things seem pretty good. We had that solid labor report last week. That was a surprise to many on Wall Street. We have stocks at record highs. Yet, this is sort of the most hated rally. That's something that Funstrat analyst, Tom Lee, described it, in the sense that there's still a lot of uncertainty out there, and there seems to be a lot of FOMO driven names that have done really well, a lot of momentum plays, even some of the meme stocks that we talk about on this show have outperformed this market. And what does that tell you? It potentially signals that maybe we're in a bit more of a frothy environment, perhaps we're a little bit overstretched. So there is a possibility that we could see more of a pullback down the line, even as stocks have seen this resilience narrative play out over the past few weeks, and especially since the April lows that we saw. So I think on the consumer side, there's still the question of whether or not tariffs will trickle through into the economy, if that could weigh on growth, if that will lead to higher prices. It certainly will keep the Fed on hold for longer and increases the uncertainty for the central bank, and we know the impact that that has on various, uh, areas for the consumer, especially when you think about mortgage rates and a lot of areas of the economy that the consumer has been priced out with so far. So that is the big TBD factor of this all, is how tariffs play out and trickle through the economic indicators that we look at closely.

Ally, real good points here, and it brings to light a new Yahoo Finance Maris poll that was out this morning, had to tip to our producer Paloma. Uh, that full piece is now on the Yahoo Finance page. 80% of consumers polled have concerns about their personal finances in large part because of these tariffs. My question to you is, Inez, where are you seeing some caution in the market? Sure, we're still at records, but there are, there are some concerns starting to build in the market, notably around potential complacency.

Yeah, I mean, look, it all depends on how the consumer reacts going into this second half of the year. And if you have, though, the, uh, the bigger spenders that are contributing towards the economy, that is what really is, is important. If they continue, if the higher income households continue to spend, that is, is what's most, most important because they're the ones that are contributing most to the economy. But certainly, when you look at the lower income households, they are feeling squeezed, and you are seeing it in survey after survey.