'Waterfall decline in US stocks': Chris Wood's GREED & fear sends warning signal 

Christopher Wood's latest GREED & fear note has flagged risk of a waterfall decline in the US stock market. Such a decline is GREED & fear's base case projection, and the prospects are just rising, it warned. 

It explained that the risk is not just high valuations but a panic unwind of passive investment where everybody owns the same stocks. 

Wood said the financial markets’ initially mild response to the US tariff announcement, prior to the US opening, should not deceive. 

"Tariff hikes are plain bad news as the historic precedent of the Smoot-Hawley Tariff Act of 1930 highlights. This is an impoverishment day, not a liberation day, in our view. It is also very significant that the US dollar is weakening, which is the opposite of what the likes of Stephen Miran, chairman of the Council of Economic Advisers, would have expected," GREED & fear said.

Wood said it is becoming ever more apparent that the second Trump administration is missing a person on the economy to curb some of Donald Trump’s more extreme instincts, most particularly when they are driven by the notion that trade is a zero-sum game. 

"This was the role extremely well played by former Treasury Secretary Steven Mnuchin in the first Trump administration," he said, adding that there appears to be a vacuum in this administration. The news that Elon Musk is leaving the government in late May is clearly negative, he added.

Wood's model portfolio is now 41 per cent invested in India and 32 per cent in China. There is another 8 per cent allocated to Taiwan and Korean technology, though down from 14 per cent at the end of last year. 

"The portfolio’s Indian stocks declined by an average of 6 per cent in US dollar terms last quarter, while the portfolio’s Chinese stocks rose by an average of 18.6 per cent," it noted.