NEW YORK (Reuters) – The summer sell-off is finally here – and not all U.S. investors are rattled by it.

After a record-setting first half of the year that pushed U.S. stock markets to new highs, a more than 760-point drop in the Dow Jones Industrial Average on Monday, triggered by the escalating U.S.-China trade war, gave battered shortsellers a chance to recoup some of what data firm S3 Partners estimates at nearly $116 billion in losses since the start of January.

Meanwhile, frustrated long-term investors who have been waiting for an entry point into a U.S. stock market whose trailing price to earnings ratio of 20.1 is well above its historical average, are pouncing. They are adding to their portfolios in anticipation that further rate cuts by the Federal Reserve or a resumption of trade talks this fall could send the U.S. market on an upward path once again.

“It’s very hard for risk assets to suffer a prolonged and sustained sharp drawdown,” when the Federal Reserve is cutting interest rates and the U.S. jobs market continues to be strong, said Ashwin Alankar, head of global asset allocation at Janus Henderson Investors.

“This could be fixed overnight with one tweet from Trump,” Alankar said.

Few are betting on a quick snapback in the markets. Yet investors are finding opportunities in assets ranging from Chinese e-commerce companies to domestic retailers like Shoe Carnival Inc (SCVL.O).

Hedge fund investor Andrew Left of Citron Research said he sold half of his China exposure a few months ago but is still long select names such as e-commerce firm JD.com Inc (JD.O), which is now his largest position.

“This volatility is not as scary … just seems like a deleveraging day,” Left said.

Portfolio manager Eric Marshall, whose Hodges Small Cap retail fund is up nearly 50% for the year, said he is adding to consumer stocks like restaurant chain Texas Roadhouse Inc (TXRH.O) and Shoe Carnival, which have both been hurt by concerns over the trade war.

“We’ve been on the sidelines and today we’re actively taking new positions in stocks that have more than adequately factored in worries about the trade tariffs and currency fluctuations,” he said.

ECHOES OF 2015

The market’s latest steep losses are reminiscent of August 2015 when an unexpected Chinese currency devaluation sent shockwaves through global markets.

Late Sunday, China let the yuan breach the key 7-per-dollar level for the first time in more than a decade and announced it was halting its purchases of U.S. agricultural products, halting a global rally which had pushed benchmark indexes in the United States and China up more than 20% for the year to date.

It was the latest salvo in a brewing trade-turned-currency war between the world’s two largest economies.

A weaker yuan allows China to offset some of the pressure from tariffs on its exports, which U.S. President Donald Trump unexpectedly said on Thursday he would increase by imposing an additional 10% levy on $300 billion worth of Chinese goods effective Sept. 1. Since then, the S&P 500 has declined by approximately 5%, while the yield on the benchmark 10-year Treasury fell to its lowest level since before the 2016 U.S. elections.

That is rewarding bearish investors like Jeffrey Gundlach, chief executive officer at Doubleline Capital, who told Reuters Monday he was “bullish” on gold since it traded at $1,190. The price of the precious metal rose above $1,450 on Monday.

“I keep telling people for months you’ve got to look at a chart and notice that this is not a raging bull market,” he said in a telephone interview. “The market is not making any progress and hasn’t for 18 months. Everywhere you look, economic data is worse than it was last October.”

Market strategists, meanwhile, are becoming increasingly worried that a slowing U.S. economy will put pressure on stock market valuations, leaving the broad market to stall.

“I don’t think you have to buy every dip, and this is a dip I wouldn’t be buying,” said Jonathan Golub, chief U.S. equity strategist at Credit Suisse Securities.

The steep declines, which have added to the worst week for stocks in 2019, are leading investors to add to bets that the Federal Reserve will continue lowering interest rates to stabilize the economy.

The fed funds futures market now points to a 100% chance of at least a quarter-point rate cut at the Fed’s September meeting, with about a one-in-three chance of a half-point cut, according to CME FedWatch tool. Lower rates are often seen as equity-friendly because they push investors toward riskier assets.

Jon Adams, a portfolio manager at BMO Global Asset Management, said rising expectations of further interest rate declines blunted the impact of Monday’s sell-off.

“Global central banks are showing that they are willing to do whatever they can to extend the economic cycle,” he said. “You could a get comment from the Fed here in coming weeks which will put a floor under equity markets.”

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