Trump is a 'wild card' for the stock market, this trader says. He's buckling up.

MW Trump is a 'wild card' for the stock market, this trader says. He's buckling up.

By Michael Sincere

Volatility is the 'new norm,' market pro Jeff Bierman predicts

'It's a trader's market, not an investor's market.'

U.S. President Donald Trump's administration has begun, and the stock market is trying to figure out a firehose of conflicting information -including the biggest wild card of all: Trump himself.

Trump "creates a crosscurrent of uncertainty, which keeps the market guessing," says Jeff Bierman. "He's mercurial."

Bierman, chief market technician at Theo Trade and an adjunct professor of finance at Loyola University Chicago, says investors will be dealing with greater stock-market volatility and uncertainty during the Trump administration.

Adds Bierman: "If there is anything the market doesn't like, it's uncertainty. Investors like clarity and steadiness. You are not going to get that consistently from him. This will be a year of volatility. It will be the new norm."

In this recent interview, which has been edited for length and clarity, Bierman discussed his contrarian views about the market, including stocks he is buying and what he's avoiding.

MarketWatch: What's your take on the U.S. stock-market investing environment now?

Bierman: It's a trader's market, not an investor's market. The market is going to move in fits and starts for an extended period. You're going to have a lot of false breakdowns and false breakouts.

MarketWatch: Do you see the stock market's support breaking down, and a correction this year?

Bierman: The odds of a garden-variety 10% correction are a fait accompli (i.e., inevitable). It's likely and it's healthy. A lot of people are calling for a 40% haircut. I'm not; I'm not expecting a massive meltdown but I am expecting a substantial correction.

MarketWatch: How are you preparing for a downturn?

Bierman: I'm lightening up on my exposure to technology. Hardware and software are in a bull market, so I'm scaling back my exposure to them and taking profits. I'm deploying that cash to semiconductors, which are in a bear market. I like stocks that have been beaten down.

My hedge is to buy a little gold (GC00) and silver (SI00). I bought Newmont Corporation $(NEM)$ and VanEck Gold Miners ETF GDX. Everyone should have some exposure to gold.

MarketWatch: Given your market outlook, what are some stocks you're buying - and avoiding?

Bierman: I added Applied Materials $(AMAT)$ to my portfolio and also Qualcomm $(QCOM)$ because the valuations are compelling. What I am avoiding like the plague are Intel $(INTC)$ and Advanced Micro Devices $(AMD)$. They are highly overpriced in a highly competitive space. They are not gaining traction.

'The AI momentum trade is not likely to work this year to the degree it did last year.'

MarketWatch: What are some long-term investment themes that are giving good entry points right now?

Bierman: I like nuclear energy and AI healthcare, but not AI computers. The AI momentum trade is not likely to work this year to the degree it did last year. I own Medtronic $(MDT)$ and Intuitive Surgical $(ISRG)$. My long trades are mostly pharmaceutical companies - Pfizer $(PFE)$ and Walgreens Boots Alliance $(WBA)$. It's been the most hated sector for the past four years, which is why I went back in. I'm also selectively buying consumer staples.

MarketWatch: What investment themes are you avoiding?

Bierman: I am avoiding retail such as Costco $(COST)$, Walmart $(WMT)$ and Lululemon $(LULU)$. If the market corrects 10% and consumers are tapped out on debt, they will dramatically curb their spending. Consumers have used their investment portfolio as if it was an ATM machine. This will affect retail stocks.

'Be unemotional. Don't fall in love with your stocks.'

MarketWatch: What advice do you have for traders?

Bierman: I would tell them not to be too bullish or bearish in their thinking, because their thesis can turn against them. If you're a trader, manage your risk. Don't take big positions and curb your expectations. Trade half the size you usually trade. Also, keep a larger-than-normal [amount of] cash on hand. Finally, be unemotional - don't fall in love with your stocks. There is a point where you have to cut your losers. You have to admit you made a mistake and walk away.

Michael Sincere (michaelsincere.com) is the author of "Understanding Options," "Understanding Stocks," and his latest, "Help Your Child Build Wealth" (Wiley, 2024).

More: Forget the 'Magnificent 7.' These 'MAGA 7' stocks have soared since Trump's election.

Also read: This strategist nailed when the Trump bump would end. He says stocks can fall as much as 40%.

-Michael Sincere

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January 21, 2025 07:04 ET (12:04 GMT)

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