More Tariff Talk – Markets Do What Markets Do
Just over 24 hours ago, President Trump finally unveiled his plans for reciprocal tariffs, providing more clarity about the thing investors have been most anxious about over the past few weeks (or at least the thing that’s been getting the most attention if you’ve been consuming financial news recently).
As the headlines came rolling in yesterday evening, our thoughts immediately turned to the futures markets, which open at 8pm ET and provide an indication of where markets will begin trading the following morning. When the futures markets opened, they projected that US markets would be down between 4-5%. That’s where US markets opened this morning… and it’s also right about where they closed this afternoon.
And we’ll note here that international markets (in which 40% of our Clients’ stocks are invested) were only down 2% today.
What does this tell us? Well, for one, that markets work. If a stock’s price is just a representation of that company’s expected future cash flows, we can extrapolate that markets took in this new information (which was a bit worse than what markets had previously expected) repriced stocks accordingly (given expectations about what these higher trading costs could do to the potential gains from international trade), and moved forward.
We don’t yet know what new information markets will be digesting in the coming days or weeks or months, but we can trust that markets will continue to do what they do (digest information and reprice stocks accordingly). And we can also trust that people will continue to do what they do, which is work diligently to improve their lot in life given the circumstances they face each day. And that that resilience, in the aggregate, will ultimately be reflected in the way markets perform in the long run.
We’ll have more of our thoughts on this topic, among a number of others, in our webinar on Wednesday, April 23rd. In the meantime, we invite you to revisit our Touchstones in Trying Times (a brief reminder of your sources of resiliency), and don’t hesitate to contact us with any questions you may have.
The Yeske Buie Team