The market was likely expecting 20% tariffs. Though the base tariff unveiled was 10%, the higher tariffs announced on America’s largest trading partners was more than expected. Though the market futures show a negative reaction, as of this writing, the futures are not below the last market low on March 31st. This will be a second test of the correction lows, and we will see if the market is bid up at the opening, or if we have to establish a new low before the recover can begin.
Many trading partner leaders overnight and this morning are talking about the need to negotiate rather than create a more intense trade war, which would be the better outcome. We believe the current pain will lead to better trade deals for America, and greatly enhance America’s manufacturing economy in time. Uncertainty did not end with yesterday’s tariff announcements, but may have established the baseline for better news in the coming days and weeks.
The market always overreacts to both good and bad news, and we are confident that the market will soon start to focus more on potential tax reform, deregulation and interest rate cuts. We anticipate continued short term volatility, but ultimately better market conditions the balance of the year. Remember the market has always recovered from short term drawdowns, corrections and even bear markets in a relative short period of time. By thinking longer term and beyond the current volatility, we believe investor patience will be rewarded.
