The opinions expressed below are my own and do not necessarily represent those of Visdom Investment Group, LLC.
Confusion.
Apple beat on top and bottom lines, as expected. There were some less-than-wonderful results under the hood, notably Chinese revenue dropping 11%. Shareholders didn’t let that spoil their party and the stock climbed after the release and S&P futures climbed in sympathy. Futures traded +10 overnight and steadily climbed until the open, where the index began the day +30. The S&P almost printed new all-time highs by lunch but the party ended thanks to tariff news from the White House. The index sunk on the news that Trump was implementing 25% tariffs on Canada and Mexico as well as 10% tariffs on China, starting tomorrow. The market lost all the gains of the day in about 15 minutes and went substantially negative in late trading. Capital flow was only slightly heavy at 116% and yields climbed somewhat.
The confusing part of today isn’t that tariffs are bad for the stock market…it’s that the news came out yesterday, dropped the index for 40 points immediately and recovered almost all the damage minutes later. This morning, markets traded as if tariffs never posed a risk. Say what?
How is the market surprised by today’s tariff news? Why did the market completely dismiss the tariff news yesterday and then accept it today?
Ultimately it doesn’t matter. Things have changed. Here’s what’s changed.
The market is no longer cavalier when it comes to Trump and his proclamations. The market has stopped assuming his threats are bluffs. He’s back to dropping headlines on the market whenever he wants, about whatever he wants, whether it’s a good idea or not. The market will just have to adjust.
That adjustment starts now.
Expect volatility to climb and stay elevated.
Don’t expect the market patterns of ’23 and ’24 to continue.
A bullish resumption in the market is a tougher road.
Don’t expect every dip to bounce as consistently.
The inflationary impacts of the tariffs are TBD…if they hit hard enough, the Fed is going to go from cruise control to hawkish.
If you think that’ll help the longs, I got a bridge to sell you.
Have a great weekend, see you Monday.
-Mike
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