During times of volatility it’s best to remind yourself of a few things.
1. **There is generally no good understanding of why stocks fall a certain percent on a certain day.** You’ll see articles like “Stocks Fall on Fears of Tariffs”, and while that’s an excellent guess, even experts do not know why the market reacts the way it does. Markets shrug off real bad news all the time, and over react to mediocre news. If, tomorrow, the S&P 500 drops 1%, what will the journalists say? “S&P 500 calm as businesses react to tariffs”? That doesn’t mean anything. There is no formula f(a,b,c,…) = price, and no one knows how investors will react to news. Why is the market seemingly jumping today? Conspiracy? Did everyone just have a good Sunday and woke up ready to buy? Who knows.
2. **Even experts aren’t sure how world events will affect stock prices.** Do most people think tariffs will depress corporate earnings and start expensive trade wars? Sure. Will it happen exactly like that? Maybe. *Even if it does*, do we know how much it will depress earnings? Do we know how many people will lose their jobs? Do we know if all that will actually result in a >40% plunge in prices? No. We really don’t.
3. **Emotions cloud judgement.** The market falls and you get spooked, that’s fine. But, trump announces tariffs and there’s thousands of news articles about the end of American hegemony and our imminent self-destruction and blah blah blah blah. These similar articles were written 2016-2020, then Biden was president, now Trump is president. Anyone here selling their stock while proclaiming the end of America, is clearly emotional, not clairvoyant. And if they put all their wealth in American dollars, are they really protecting themselves from the outcomes of their thesis? I don’t think so. If you truly believed these theories, you would be focused on other things. But if you say that, liquidate your portfolio, and then go to your office job the next day, eat dinner and watch a movie, well, that was likely pure raw emotion. Or you’re just embracing the incoming storm.
And avoid posts about what everyone is feeling. If you want to know then check prices in the markets and options exchanges. That’s the most accurate data about market sentiment you’ll be able to find, and even if you follow it, once again no one knows if those feelings will result in prices going lower or higher.