Investors attribute market sell-off to China trade tariffs, overconfidence in American consumer

Kaltbaum Capital Management President Gary Kaltbaum told FOX Business he is 100 percent sure the market is decelerating this quarter due to our trade war with China.

"I speak to businesses, they’re starting to feel it and look the tariffs are working against the economy right now, and if it continues, nothing good is going to come of it," he said on “Making Money” Wednesday.

Kaltbaum attributes this way of thinking to the drop in the 10-year treasury yield.

“It’s telling me we’re getting a slowdown. I think we’re probably in the 1 GDP this quarter and I do expect the Fed to make a move in the next month or two lowering rates to catch up. Maybe that helps but right now we’re on the defensive.”

While he acknowledges that the market has been doing extremely well in the past four months, Kaltbaum also points out that there seems to be an overall selling with retailers like Johnson and Johnson, Lulu Lemon and Abercrombie & Fitch, who are "basically crashing.” He expects the next few weeks’ figures to be "ratcheted down.”

Bubba Trading CEO Todd Horowitz shares Kaltbaum's concerns that the market may be in serious trouble in the long term, but he believes it is due to over confidence by the American consumer.

“When you look at the overall picture, yes maybe the consumers are very confident but they were also confident in ‘08 and in ‘01 and in ‘87,” he said. “So, again, when they get too overconfident, they build too much debt, they build too much complacency and they forget about the real important things of how they got back on their feet in the first place and all of a sudden we’re over leveraged. So I think there’s a lot of trouble way ahead and I think we’re going significantly lower."

Horowitz believes the market may be headed back towards the lows experienced of Christmas Eve.

“I mean I could see 2,400 in the [S&P 500] and I could see taking out the lows of December before it’s all done. Not tomorrow of course, over a period. This move in my opinion, this down move will continue to accelerate. We will continue to make lower highs and we’re going to make substantial lows but I think the next target would be like 26 or 25 and then 24 and then below Christmas Eve’s lows and I think that’s where we’re headed before this is done,” he said.


Horowitz adds that he could change his mind if he sees signs of support, but he believes we're more likely heading towards the very early stages of a recession. He is hopeful, however, that eventually the market will work itself out.

"I think we’ve got issues to deal with and it’s just, I think, a slowing economy and investors should close their eyes and just let the market work because eventually we’ll be higher than we are now and we’ll be higher than where I think and 10 years from now we’ll be 10% higher per year on average."