By: Rob Wertheimer
As tariff issues grow and shift machinery has continued to trade down, with stock movement lately more in line with beta than with actual fundamental exposure. Since March 20, when the incremental tariff risk began to be priced in, Terex, Navistar, and the three ag machinery names, Deere CNHI and Agco, have been the worst performers. The ag names make some sense: for reasons of US political geography, China has threatened soybean tariffs, and announced some more minor ones like in pork. Ag underperformance may therefore be merited, less because of direct tariff risk than because the tariffs may expose or trigger confidence issues in a fundamentally oversupplied and under-profitable market. In contrast other names look a little more interesting, and may become more so if the market continues to trade down on beta.