Latest / The Bear Market Podcast with Fexingo: Surviving Downturns, Buying the Dip, and Long-Term Resilience / China Robot Ban Retaliation Reshapes Dip-Buying Strategy
Transcript
- Lucas: So China just threatened retaliation against the US humanoid robot ban, saying it 'severely damages' relations. Markets took it as a punch in the gut — the Nasdaq is down 2.8 percent in the last five days, and the VIX jumped above 20. Luna: That's a pretty quick move. I was looking at the Dow, though — it's only off 0.2 percent in the same stretch. So the selloff is really concentrated in tech. Lucas: Exactly. That narrow breadth should make any dip-buyer stop and think. If today's conversation helps you think about that kind of decision more clearly, the way these episodes stay ad-free is listener support — buy me a coffee dot com slash fexingo. Luna: Yeah, it's a small gesture that keeps the show independent. And it's nice to know it's coming from people who genuinely get value out of the conversations. Lucas: Right. So back to that concentration — the robot ban retaliation is aimed squarely at US tech. China dominates cheaper AI models, and the US wants Asia to use its own chips. That's a direct threat to NVIDIA and a lot of semiconductor names. Luna: But geopolitical shocks like this — how do you separate a buying opportunity from a value trap? The 2018 trade war taught us that some dips are just the beginning. Lucas: Great question. The key is whether the shock changes the underlying earnings trajectory. In 2018, tariffs hit supply chains permanently, so companies had to restructure. This time, the humanoid robot ban isn't a huge revenue driver yet — but the retaliation could widen. China could restrict rare earths or target other tech exports. Luna: That's a lot of moving parts. And the VIX at 20.66 is still below the peaks we saw in 2022, but it's up more than 10 percent in five days. That suggests options markets are pricing in more downside risk. Lucas: If you look at the VVIX — that's the volatility of volatility — it's at 109, which is elevated but not panicked. The last time we saw a similar setup was in early April, right before a 5 percent correction in the S&P 500. So the message is: be careful, but not terrified. Luna: So what's your framework for a dip worth buying? Give me the one concrete signal you watch. Lucas: I look at the yield curve. The 10-year minus 2-year spread has widened to 0.45 percent — that's steepening, which historically has been a bearish signal when it happens from an inverted start. But the steepening also tells me the market expects easing, which eventually helps growth stocks. So I'd wait for the VIX to drop below 18 before adding risk, and I'd focus on sectors that benefit from deglobalisation, like defense and domestic manufacturing. Luna: That makes sense. Lockheed Martin and the defense names have been steady. But for the average listener holding a tech-heavy portfolio, is selling into this dip the wrong move? Lucas: Selling into a geopolitical shock is usually a mistake if your time horizon is long. The 2022 Russia-Ukraine invasion knocked the Nasdaq down 4 percent in a week, but six months later it was higher. The problem is timing: if the retaliation escalates, you could see another 5 to 10 percent downside. So I'd say trim a little, but don't panic. Use the volatility to rebalance into quality — companies with strong balance sheets and pricing power. Luna: And what about the Fed? The meeting earlier this week — they basically held steady, but the market is pricing in a cut by year-end. How does that factor in? Lucas: The Fed is watching the same geopolitical risks. If the retaliation hits growth, they'll be more inclined to ease. But inflation is still sticky — core PCE is above 3 percent. So they're stuck. That uncertainty is part of why the VIX is elevated. I think the best play is to stay diversified and keep some cash on hand to deploy when the VIX spikes above 25. Luna: So the takeaway: don't buy this dip blindly, wait for volatility to subside, and focus on sectors that benefit from trade tensions. Lucas: Exactly. And keep an eye on the headlines this week. If China actually follows through on restrictions, that's a different ballgame. For now, it's a manageable shock, but one that tests the dip-buying discipline.