Macro News:

Markets are selling off amid the expected tariff response from China and overall anxiety related to the trade war. China is implementing an additional 34% import tax along with other trade restrictions. We also got a batch of U.S. macro data this morning, with payrolls much better than expected, monthly wage growth in line with expectations and unemployment still at a very healthy 4.2%. U-6 unemployment (broader definition) actually fell from 8% to 7.9% M/M. This continues the trend of structural data looking better than sentiment and survey-level data. Despite all of the noise we see, we’re firmly in full employment territory with healthy rates of job growth and sustainable wage inflation. With consumption powering ~70% of our economy, this is what matters most. It makes me confident that consumers will combat any new tariffs (for as long as they last) from a point of strength rather than weakness.

For more information on why I’m adding amid new tariff concerns, I think the two pieces below do a good job working through my point of view and how I’ve handled the last 2 months:

Portfolio Updates:

I’m breaking a rule today that I haven’t broken before. It’s not entirely comfortable for me, but I do think it’s the right decision. I am dipping into the core emergency savings account and making more cash available. This is not the cushion that I talk about so often. I have used that up. This is the taking from the main piece. I cannot get any orders filled on Schwab before 9:30, but I wanted to send this out as soon as I finalized the decisions. This overall chunk represents 10% of total holdings. I will use nearly 60% of that chunk today. I plan on allocating the remaining 40% as (or if) we see more volatility. I said I would use Lulu as the next source of cash, but I cannot bring myself to do that today. Tariffs will not mean the end of the apparel industry; I expect more favorable deals to be signed; they’re executing better on newness; they’re poised to do very well when macro brightens and I don’t really want 0% exposure to the space.

Still, the Lulu sale would have to come after this source of funds if I wanted to keep adding; I simply cannot immediately make more cash available than I have at this time. I’m happy to not get that chance… I’m happy to refill the emergency account faster… I’m happy to keep owning shares of Lulu.

I am running my playbook and using my hard-earned dollars to express my unwavering optimism, while knowing there could still be more noise before things get better.

I am hyper-conservative in my finances to reflect being self-employed. While conventional wisdom says emergency funds should cover about 6 months of expenses, mine currently covers a little more than 12 and was nearing 18 months at the start of this pullback. This prudence makes me more comfortable with investing in my business and funding my day-to-day life with no doubt. While that serves me well, I am determined to make as much cash available for investment as I can today. I want to gift myself the flexibility of most aggressively accumulating shares of thriving companies while Mr. Market indiscriminately and aggressively sells everything and asks questions later. At this point, multiples have contracted more than enough (especially in tech where I focus) to account for a 10%-20% earnings estimate reduction assumption I’m seeing from many sell-siders. So either we’ve largely priced in the sky-high tariffs, or those tariffs will soon fall (like I expect) and we’ll have priced in too much weakness.

With a volatility index (VIX) over 40 and approaching its highest level since the pandemic, record S&P 500 short positions, a 6 reading on the fear and greed index and record fund outflows, the panic is getting stronger and stronger.

This is when I want to get bold and lean in. This is when I think investors make the tough decisions to get paid down the road. As I say so often… being “greedy when others are fearful” never feels comfortable in real time. I will worry about being 100% comfortable later.

Here’s what I will add to in a little less than an hour (using that 5.87% cash position you see in the image below that was moved over this morning):

The portfolio update below reflects yesterday’s adds. The next update will reflect today’s adds: