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After’s Trump’s tariff speech last night the S&P500 crashed over 4% in afterhours trading. It looks poised to open down about 3% today. This brings the 2025 market pullback to over 6% and about 10% since Trump’s inauguration and down about 11% from the peak in March to today. That’s a decent pullback in a little over a month, but far from record-breaking, so what do you do now? Well, in short, I cannot give personal financial advice but I can say I bought some during afterhours trading last night. So stick around as I explain why I did and you can then decide for yourself whether my approach is relevant for you. And stick around to the end and I will share with you my favourite stocks to watch today and over the coming weeks.
When you look at what has primarily driven the market since covid, the magnificent-7 tech stocks, they have all pulled back around 20% or more over recent months, so they have led the market down and all took a decent leg lower again in afterhours trading. So should you be buying the mag-7 or the rest of the market?
The key distinction to ponder is whether Trump’s new tariffs are POLICY or POLITICS? Meaning are the tariffs new long-term policy or mostly a political negotiating tool? Therefore, as the coming weeks and months play out do we see deals be made and the majority of these tariffs be removed? Well firstly, what was announced last night will not come into effect until the 9th so we have one week to find out how fast this will happen. Alternatively, affected countries could retaliate and increase tariffs leading to the US retaliating and a worst-case scenario of ever-increasing tit-for-tat tariffs play out.
We got some hints on the answer to these questions and the likely scenario and I have my opinion also. So first, the hint we received yesterday was US treasury secretary Bessent told lawmakers that these will be the maximum tariffs and the US tariffs will only come down from here if trading partners meet Trump’s demands. Therefore,… we can read between the lines and say if other countries do not retaliate then what was announced yesterday are the highest tariffs the US will initiate. So that’s somewhat good news, although these tariffs are still a pretty bad scenario short-term but at least some certainty is starting to appear, which is what the market craves.
Since Trump’s speech last night, many countries have already responded. The UK and Australia have said they will not retaliate and instead begin talks to reduce what the US has imposed. Japan, India, New Zealand, Taiwan, Thailand, have also responded cautiously saying they will open dialogue with the US. Canada, Mexico, China, South Korea and the EU have said they will get ready to retaliate in some way. So we can start to see a picture immerging already.
Second, we need to ask is this likely to lead to lower rates and lower rates sooner, as there is definitely room to cut rates and provide a short-term boost to get through this new tariff transition period. Well, central banks are supposed to be independent, but US treasury secretary Bessent has already asked the Fed to lower them. The Fed is supposed to be tied to the economic data and it has been showing signs that cuts are on the way, and the market’s prediction for three cuts by year end (so down by 0.75% total) went up initially following Trump’s speech… BUT what’s the big issue with tariffs? Well, they increase prices and what’s inflation mean?It’s an increase in prices. And how should the Fed respond when prices/inflation is increasing? They should hold, or more likely, increase rates in an inflationary environment, not decrease them. So, while the market thinks the next step is a cut it also thinks the next cut will come slightly sooner since last night’s speech. BUT…even in an “economic emergency” (Trump’s new claim) economic data could fight the Fed’s ability to cut. And could we assume rates will be cut elsewhere around the world? Well, as recession and downturn fears rise that is certainly more likely.
So in summary, of course this is hugely negative news today as clearly shown in after-market trading the S&P500 was down over 4% at its worst. But all things considered right now today, I personally think this will likely be near the bottom of this news, hence why I started to buy some long-term winners. BUT I am doing so in the face of overwhelming uncertainty so just know that if you are doing the same. That said, I am a long-term investor and long-term I see opportunities today. We must see how the US market opens today and equally important how trade plays out over the session to get a stronger guide.
Now, as I have said in my prior posts/videos, we should all generally respect the 3-day rule. Meaning…give the market three days to digest any new significant news and establish the trend from the new-news. So, I will largely do that too but I also like to be opportunistic on a big move day like this. BUT… as this is still a highly uncertain time and uncertainty means MOST investors will NOT be willing to take LARGE bets today and therefore the most likely trend is to continue down or remain around here for a few days until more countries announce what they plan to do to respond. Therefore it is wise to keep some powder dry, decide on your stocks in focus and be ready to invest as more certainty is provided.
Further, if I had to guess what the tariffs will be in a month from now, I would guess less than what was announced today and by Q3 I think less again and Q4 likely it has settled to a long-term tariff plan of 5-10% flat-rate across the board for most countries. With the key exemption being manufacture your products in the US for zero tariffs. This flat-low-rate long-term will allow Trump to reach his self-stated revenue generation goal and MAGA – Make America Great Again by bringing manufacturing and jobs back to America. Plus… global companies will have more certainty that by doing a net-present-value calculation over 10 years of the likely benefit of moving some or all manufacturing to the US.
So, in my opinion, this is primarily a 2-3 month political negotiating tool and uncertainty issue. As quick as they arrived, they could disappear and most likely will. Although I can’t see the future but best-guess Trump will want victories to show his political and economic power of his tariff plan. And Trump will not want this to drag on for years, he’s the art of the deal guy. He wants deals ASAP and then hopefully see the longer-term benefits of his deals to arrive during his presidential term. IF I’m right, then investing now and investing more over the coming weeks and months will prove to be a great decision. It’s sadly a really big IF right in this moment though.
Now as promised. Which names are my shortlist names? Firstly, AMZN and GOOGL, both names have powerhouse businesses and substantially discounted today to week ago. Also slightly more risky, but great long-term businesses are NOVO, BABA, NVDA, TSLA and BYD. A safer option is simply to start to dollar-cost-average into the QQQ (the tech sector), which is down over 15% since late Feb or SPY (the entire S&P500). Like I’ve said in previous posts/videos, if you invest regularly to compound your returns then a great way to enhance that long-term compound effect is to add more during 10% or more pullbacks, as we often get one each year. So here it is folks. Will it become a 20% pullback? If you think so, then also be ready to add more then.
Good luck folks! Very interesting economic times. More posts/videos to come so please bookmark/subscribe to follow along.
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