It’s very difficult to know if we’re at or close to a market bottom. They rarely occur over the space of weeks – it generally takes months. But I cannot predict when (or what) the bottom will be. However, I think the ~20% correction from the market high (6147) to the low (4834) tells me a large portion of the selling is behind us. For example, we’re now starting to see equity exposure significantly reduced and cash levels raised. This is a good sign… as there are a lot less people to sell.
Risk
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Downside Unlikely Over
From the moment Trump announced his blanket 10% tariffs in addition to so-called “reciprocal levies” – it’s been an exodus from risk assets. The selling was immediate and sharp – something we’ve not seen since the pandemic five years ago. However, as I will demonstrate, there could be more to come. And from mine – further sharp selling could set up a great buying opportunity for long-term investors.
Uncertainty Weighs
It doesn’t take much these days to knock investors off balance. This week it was Trump’s 25% on auto tariffs and a slightly hotter-than-expected inflation print. Tariffs are inflationary… a tax on the consumer. And with (services) inflation remaining stubborn… it gives the Fed very little wiggle room to cut rates. In combination with various geopolitical developments and aggressive government spending cuts from the Department of Government Efficiency (DOGE) – this has pushed policy uncertainty to its highest levels since late 2020.