Less than fifty days ago, my inbox was chock-a-block with emails like this one:
“HELP! My share portfolio is getting smashed! On the news last night Alan Kohler said that Trump’s Liberation Day tariffs are much higher than the Smoot-Hawley tariffs that caused the GREAT DEPRESSION! Is it time to sell?”
At the time the share market was 16% off its highs, and it suffered its biggest one day drop in five years.
What happened next?
Well, as I predicted, Trump folded like a cheap Aldi table, pausing the tariffs for 90 days. This caused the market to roar back as if nothing had happened.
And all those worried emails?
They stopped coming.
Do you know what this reminds me of?
Actually, the Great Depression.
Black Monday, October 1929, is etched in world history. You’ve probably seen that iconic photo of the poor bloke trying to flog his luxury car for $100 on the streets of New York. The sign on the bonnet read: “Lost all on the stock market”.
Yet here’s what most people don’t know:
By April 1930, the stock market had bounced back … it was up 48% from the October lows.
US President Herbert Hoover boldly declared to the world that “the worst is over”.
Phew!
Yet, as soon as those words left his lips, the market began puking.
Violently.
And it kept chundering for the next two long years. When it finally lifted its head from the toilet bowl, the share market had dropped a staggering 89% from its 1929 peak.
Now let me be very clear: I am not saying we are on the verge of the greatest crash in history. What I am saying is that humans have short memories. (Okay, and that US presidents cannot be trusted.)
Arguably the world’s shrewdest banker, JP Morgan chief Jamie Dimon, agrees. He’s worried about the Trump tariffs, even in their reduced form, arguing that the US hasn’t felt their effects yet. “The market came down 10 per cent, it’s back up 10 per cent. I think that’s an extraordinary amount of complacency”, says Dimon.
The fact is that Trump has three more years in the Oval Office, and what about this guy says, “I’m just going to go about things quietly, diligently and make no waves”?
My guess is that he’ll get even crazier as the days tick down.
Now, if you’re like me and you got through the Trump tariff tantrum without checking your portfolio, you’re probably good to go with whatever comes next. However, if you were one of those people sending me anxious emails fifty days ago – consider this your ‘do over’.
As Warren Buffett warned investors last week, while the long-term trend is up, “you will see a period in the next 20 years that will be a hair curler compared to anything you’ve seen before”.
Plan accordingly.
Tread Your Own Path!