He Pushed the Red Button

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Welp. The world is fighting back. China just announced that it’s going to slap us with 34% tariffs. The grounds of the global markets are violently exploding underneath our feet. Dow futures are down another 1,000 points after falling ~1,700 points yesterday. The VIX is over 40, and interest rates are dropping like a rock as the fears of a recession firm up.

The good news is that the market is now taking him literally, not just seriously. I, like many others, got this very wrong. Some of the stuff I’ve said on the pods over the last few weeks has aged like a fine diaper. Hand up. My thinking was that the market tends to overreact to things, and it wasn’t overreacting. The market was wrong. I was wrong.

What the market (and I) couldn’t believe is that he was actually this reckless. A big red button on his desk said, “Push to destroy the global economy.” He pushed it.

Animal spirits were awakened as soon as Trump won the White House. CEOs were giddy. Investor confidence went vertical, along with the stock market. Ya know, “The business President” and all. It’s surreal. I’m having a hard time making sense of what in the world he is thinking.

I’m still a long-term bull. We will eventually look back on this sell-off as a gift for investors with the stomach to ride out the insanity. But I’m definitely less confident than I was last week about how long it will take for us to be rewarded. The damage he’s done cannot be undone with a tweet.

This is where his second term stacks up with prior administrations’ first 75 days (assuming a closing price of where futures are currently indicating). This would be the second worst, only George W. Bush, in 2001.

I’ve shared this “Reasons to Sell” chart many times over the years. Unfortunately, and I hate to say this lest it scare anybody, but this is probably the most legitimate reason. If he’s looking to create a new world order, then yeah, this could go from bad to worse.

And yet, for me, the reason doesn’t matter. I’m not selling. I will never dump stocks because I’m afraid they will go lower. I made this decision a long time ago.

One of my favorite charts on the Exhibit A platform for advisors shows what happens if you only invested at major market tops and held on for dear life. The message is simple: Never bet against America over the long term, no matter how bad the moment might feel.

I’ll leave the final word to the great Morgan Housel, who poetically said, “Every past market decline looks like an opportunity, every future decline looks like a risk.”