The opinions expressed below are my own and do not necessarily represent those of Visdom Investment Group, LLC.
Discounting risk.
Overseas markets climbed but our futures didn’t trend. The S&P ended up opening flat before rallying early. Investors collectively dismissed the risks associated with tariffs and went back to the playbook of ’23 and ’24, buy early and often. Investors bid US Treasuries also. The bond market isn’t worrying about inflation and a hawkish Fed either. Palantir crushed their earnings reports and the stock climbed 25% today. That grabbed headlines and attention but also hid the fact that of the 30 stocks in the S&P that reported today, 22 of them fell.
With the delay of the Canadian and Mexican tariffs, investors have assumed that they will never happen. The market, with high confidence, thinks that tariffs are all bark and no bite. That’s a very curious evaluation of the situation but it is what it is. Tariffs are not treated as a risk at the moment.
That will be fine as long as tariffs never materialize and never damage the economic environment. If the Chinese tariffs, which are not delayed, do hurt the economic situation, the market will be caught by surprise. The bulls of late will be punished severely.
That reconciliation can only occur in time. Arguments about whether the tariff talk should, or shouldn’t, affect valuations are academic currently. We all must wait to see the outcome. Who knows when that will be.
In the meantime, everyone is watching the headlines for tariff developments…but they are not taking them very seriously. The market is embracing the positive aspects of tariff news and dismissing the negative ones.
That’s quite an asymmetry in market interpretations.
See you tomorrow.
-Mike
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