For markets, it’s the unpredictability that’s going to kill you
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Your Guide to What is the US 2024 Choice for Washington and the World
The US stock exchange absolutely hated President Donald Trump tariff offers. One day after the announced, the S & P 500 fell by 5%, since the worst day since 2020, and the pain continued on Friday. Technical shares, small companies and banks are worsened. At one level this is easy to explain. Everyone agrees that the tariffs will increase the costs for US companies and at least short and medium to play their earnings. The shares are partially earned at prices.
Depending on your personal theory, how to operate tariffs, you can prices for lower earnings and shares, which will pay an acceptable price today, say, for higher domestic production and salary. It seems to mean what Trump means when he said The tariffs would have caused “a little disorder”, but we are fine with it. “
But markets have a bigger problem than the prospect of a short-term decline. Investors and companies can adapt to many things when they know the rules. Rules with Trump are always changing.
When any new policy is presented, the markets should buy not only the effects of politics, but also the assessment of how long it will last. Thus, the correction we see for writing this is 15% in February during the month of February.
But the market has a third, even more difficult assessment puzzle, as Trump’s tariff policy will win always be a moving target. How are you the price?
You can see why the administration looks calculated The alleged tariffs of his trading partners. The resolution is based on the size of the trade deficit of each country with the United States compared to its total exports of the United States. These “mutual” tariffs are not calculated on other countries imposed by the United States on tariffs or non-tariff barriers. They are just based on a deficiency.
This implies that deficiencies can only lead to an unfair trade practice, which is just false. Should the United States have a balanced trade with countries that do not sell things we need, but what we produce? Or other way. Trump’s administration policy is not only wrong, it is dishonest. The minimum tariff for all countries, regardless of tariffs or deficits, is not mutual. These items are just crazy. According to the former secretary of the treasury Larry Summers, he put it economically what the work is for biology.
Anyone with a persevering false belief will have regular, unpleasant action with reality. They change the course only to drive the same. Trump will not receive what he wants from his tariff policy, so he will continue to change it, leaving the markets roar. Tactics will remain zigzag as a fundamental strategic mistake.
Trump’s tariff calculation is only one example of price chaos that markets appear. The outlines of politics have not been telegram in advance and have reached a mass surprise. And the Television of Trump’s Economic Advisers is announced before, and then it seems that alarms are designed to investors. Non-trade secretary Howard Lutnik New Treasury Secretary Scott Best was introduced in advance or prepared to explain the next steps. Was this world changing policy written during the night?
The strict strange of the presentation has been a mirror in the markets with unusual activities due to the Liberation Day. For the rest of the United States, US tariffs, all others are equal, must drive the dollar value (the demand for the US demand to import the demand for import). The global economic shock should also start demand for the dollar. It has been the world’s safe shelter for a long time. But the dollar has weakened. The simplest explanation is that investors are watching a new level of uncertainty in the discus and the uncertainty of dollar nominal assets, and they go out of that way.
Trump, one could argue, was as much mercy in his first term as he today, and the markets prospered. But since then, the global context has changed dramatically. US stocks and risk assets generally are significantly more expensive, compared to history and other markets than they were in 2017. Inflation is out of the bottle, reducing the monetary room by the Central Bank. And the United States was slowly slowing down the pace of unstable growth of post-boom. China’s economy, the growth engine of the world is shock.
None of these fact is the economic destiny, but the situation is much more delicate and unpredictable than eight years ago. Stable hand will really help.
Markets, companies and farms are wonderful fragile things. Given the time, they will make trade results that require high tariffs. But the whimsical political style of Trump’s administration does not have an upside down. What produces is a dead loss.
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