Please ensure Javascript is enabled for purposes of website accessibility

Why Retail Stocks Are Rocking on Tuesday

By Rich Smith – Aug 13, 2019 at 2:30PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Trump's trade rep appeared to relent on Chinese tariffs, and stock markets are rejoicing.

What happened

Shares of some of America's most popular retail chains got a shot in the arm this morning (the good kind, not the one that makes your kids cry). President Donald Trump's U.S. trade representative announced new caveats today, applying to the latest round of 10% tariffs that may (or may not) be applied to Chinese imports to the U.S. come September.

There's word of a potential delay (to Dec. 15) on the imposition of tariffs -- on cellphones, laptop computers, toys, clothing, and other items -- combined with the removal of other items from the tariff list, and the announcement of a process for excluding even more items. These factors helped lift shares of retailers such as Bed Bath & Beyond (BBBY -6.22%), Best Buy (BBY -3.50%), Dollar Tree (DLTR 0.15%), Michaels (MIK), and Target (TGT -2.56%) by anywhere from 5% to over 10% in early trading Tuesday.

Two arms shaking hands over a world map, one with a sleeve displaying the U.S. flag and the other displaying China's

Image source: Getty Images.

So what

But could these be the kind of "easy come, easy go" gains (and losses) that we've come to expect from news concerning President Trump's tariff tantrums? I kind of think they are.

Remember, this administration was for tariffs on Canada and Mexico before it was against them. Similarly, tariff threats against China have been invoked, then recanted, multiple times over the past couple of years. Perhaps investors are recognizing that this latest development could be little more than a negotiating tactic, as easily retracted as it was enacted; shares of all five of the retail stocks named above are already beginning to shed some of their gains from earlier in the morning.

As of 11:05 a.m. EDT, shares of Bed Bath and Beyond are only up 0.4% (down from an earlier gain of 5.9%). Michaels is holding onto only a 1.2% gain (it surged 10.4% earlier), while Dollar Tree's 8.1% sprint higher has been essentially halved -- back down to 4.9%.

Best Buy may be the company most likely to benefit from the removal of electronic items from the tariff list, though, and Target from the removal of toys; they remain up 5.8% and 3.2%, respectively.

Now what

How is a lone individual investor supposed to react to such a topsy-turvy world, in which trade tariffs can jerk stock prices around so much and so abruptly? Honestly, I can't think of a better time to remind investors of Warren Buffett's timeless advice to "be fearful when others are greedy and ... be greedy only when others are fearful."

When Wall Street reacts with irrational exuberance to a tariff cut that you just know isn't as good news as it sounds, that's a great time to sell some stocks and take some profit. On the other hand, when new tariffs jolt the market into a fear state, that could be a wonderful time to do some buying.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool recommends Michaels Stores. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Best Buy Stock Quote
Best Buy
BBY
$64.47 (-3.50%) $-2.34
Dollar Tree Inc Stock Quote
Dollar Tree Inc
DLTR
$142.35 (0.15%) $0.22
Target Corporation Stock Quote
Target Corporation
TGT
$151.76 (-2.56%) $-3.99
Bed Bath & Beyond Inc. Stock Quote
Bed Bath & Beyond Inc.
BBBY
$5.50 (-6.22%) $0.36
The Michaels Companies Stock Quote
The Michaels Companies
MIK

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
338%
 
S&P 500 Returns
108%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 10/07/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.