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Tariff Concerns Spook The Market, But Pullback Creates Great Buying Opportunity

Tough day in the market yesterday with all of the major indexes down on average of -2.5%.

The market was ready for smooth sailing after Wednesday's FOMC report where the Fed raised interest rates exactly as the market had expected, lowered the number of rate hikes planned for 2018, and increased the growth outlook for both this year and next.

But word that the White House had ordered $50 billion in tariffs on imported Chinese goods, followed by a sharp rebuke from China where they stated that they "don't want a trade war but are not afraid of it", sent stocks reeling.

I still don't believe a trade war will ensue. But the fear of one spooked the market. I believe it was a classic overreaction, as the market is prone to do. And I still believe the worst of this correction, which began in late January, is behind us. And while that doesn't make the pain of yesterday's rout any less painful, I would still look at these pullbacks as buying opportunities because there's nothing out there fundamentally or technically to even remotely suggest this historic bull market is in jeopardy.

These kinds of dips can be trying. But being able to weather these market gyrations and think rationally can make all the difference.

Traders will be eagerly awaiting more info on the tariff developments -- both from the US and China. In the meantime, I would consider this as nothing more than the market continuing to trace out its correction/consolidation pattern against the backdrop of a busy news cycle.

I would definitely be looking at some bargain hunting at these levels, and even more so if the market backs up even further.

Best,

Kevin Matras

Executive Vice President, Zacks Investment Research

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