There are 3 scenarios investors must prepare for, strategist says

Yahoo

06-05-2025

00:00
Josh Lipton
You say, Tim, for investors, there are three potential scenarios to think through in the months ahead. Walk us through, Tim, to start, what what those scenarios are exactly.
00:15
Tim Seymour
Well, Josh, it's great to see you. And and right now, we think it is incredibly important for investors to prepare their portfolios for maximum flexibility. Uh, nobody knows the endgame when it comes to tariff. I tariffs, I'd venture to say, not even the president himself knows uh the end outcome. And this could go many different ways. You know, on the bullish side of the spectrum, we could see uh very significant deals struck with all major trading partners, which could very easily push the S&P 500 up in the 64, 6500 range. You could see legal challenges uh to to these tariffs be successful or you could see the president start to walk back uh some of what he's laid out thus far this year. That's that's the bull case, very good odds of one of those three playing out. Uh, and then on the the bearish side, which is is almost equally uh as important to be paying attention here, uh you could see deals struck with just some of the minor trading partners. There's a lot of hair uh on deals when we look at things like China or the EU. Uh, if that happens and those tariffs stay on for a long time, uh you know, recession would become our our base case in which case you'd see valuations derate meaningfully. Uh, we could easily see the S&P going back to that 41, 4200 range. So, right now, uh a lot of uh question marks need to prepare that portfolio for maximum flexibility.
02:29
Brian Sozzi
So how do you go about doing that? I mean, because these, even though there might be some bleed over from some of these cases to one another, right? There might be some from column A, some from column B. But it seems as though there might be quite different outcomes in markets depending on what happens here. So, how do you prepare your portfolio for any one of them to happen?
03:07
Tim Seymour
Yeah, I think there's a couple different options here. Um, one would be looking at specific names in the market that are going to be more insulated. Uh, when we look at names like Microsoft where they they sell software, right? They're not going to be as impacted by the tariffs. They're also in the midst of this AI trade, which we don't think anything is slowing that down. Uh, you heard uh a lot of the spending announcements on recent earnings calls from the Metas, uh Amazons of the world. That that trend is going to continue. So, finding gems or diamonds in the rough like that is one way. We're also seeing a lot of interest from investors moving into strategies that help cover you on the way up and the way down. Uh, one idea that has been very popular this year, uh managed floor ETFs like SFLR where you're targeting a 10% floor against losses on the downside, and then if the market goes up, you're participating in 70 to 80% of the gains. So, we see both of those methods, really finding those stocks that are going to be more insulated, and then also hedging uh with options-based strategies like SFLR is is really a good way uh to manage around and prepare for a wide range of outcomes.