The market is having a pretty strong reaction to the tariff announcements. This isn’t surprising because they had advertised, built up and speculated over what President Trump would announce for about a month. No matter what he unveiled, there was going to be a reaction because the institutional traders had a perfect excuse to scare the markets. That is what we believe is happening today. The hedge funds are blowing their trumpets and trying to scare the individual investors out of the bushes so they can slaughter them.
We are taking the approach of doing a small buy because the market is on a 5% sale compared to yesterday. In the unlikely event that the market is on a 10% sale tomorrow, we will keep buying and so on. The reason we are doing this is that we don’t see the tariffs as being that big a threat to the US economy. Yes, some companies will be hurt, others will benefit, and prices could go higher. However, this isn’t going to crash the economy and we likely will forget about it in 6 months or less. There is also a very likely chance that the tariffs don’t persist or are changed significantly. In the last few months we have seen several big tariffs come, go, come again, and go again or get modified. There is no reason to believe that doesn’t happen again, particularly after The President asked for negotiations yesterday during his speech. Even if a 10% tariff stuck around on everything, that would be like gas prices going from $3.00 to $3.30. That’s annoying, and we will complain about it, but it won’t ruin the economy.
A telling fact that we shouldn’t be overly worried is that the extremely competent people over at the Federal Reserve haven’t acted. At the last Fed meeting, just a couple weeks ago, they decided the economy was still too strong and they weren’t going to lower rates. So far, they haven’t acted on the new tariff news. We know they are watching and will react if needed. In fact, if you recall the failure of Silicon Valley Bank a couple of years ago, they quietly pumped a half a trillion dollars into the economy when that was happening, and that was just a single bank. So we are fully confident that if economically there is a true worry, the Fed will act.
That does not mean the stock market won’t take lumps if there is more news. It does not need to act rationally. What we need to concern ourselves with is not whether there is a problem with the economy, but whether that problem will be solved in a reasonable way. As long as we expect the problem to either be small or easily solved, then any downturn in the market should be looked at as a buying opportunity.
I do know that the constant changing of the wind politically does affect individuals and that can be a terrible thing. Hopefully none of you are directly impacted by the tariff news. I am also sure there will be a lot of parts and material buyers and sellers who will have huge headaches because of this but we do expect the hubbub to die down as attention shifts to something new.
