Sideswiped by Tariffs

Clearly, the stock market just went through a retest of the bottom it made a couple of weeks ago. Retests are often a pattern that markets go through in making a durable bottom. It is sometimes referred to as a “W” bottom from the price chart shape that such action traces. It looked like the test would be successful, but then the president announced a new tariff regime. The announcement was far more than investors were expecting. The stock and bond markets reacted.

Stocks sold off dramatically. Investors fear real pressure on earnings and economic activity because of the higher expected prices when adding tariff costs. There are also concerns that inflation will increase. However, U.S. Treasury securities actually went up in price and lower in yields as traders sought a safe haven. Sooner or later, interest rates will have to reflect the increase in inflation, so be wary of chasing these.

Unfortunately, the stock market had been setting up a classic bottom with a recovery in sight. That has now been delayed. How long it will take to reestablish a trading low is anyone’s guess. However, the Bull believes that that is not far off. Much had already been discounted before the recent tariff increases. There will be a set of winners and losers. The stock market has already been showing those. This action does not indicate another shift, just a more emphatic trend already in place. This will pass, stay steady my friends!

-The Lonely Bull