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.
Risk
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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.
Why Buffett’s Mentor Would Reduce Risk
I’ve been re-reading “The Intelligent Investor” by Benjamin Graham. Warren Buffett called it “by far the best book on investing ever written” – crediting Graham with laying the foundation for his entire investment philosophy. The book taught me three powerful lessons: (1) above all else, investing is about protecting your capital; (2) investors should strive to pursue adequate and sustainable gains; and (3) it requires overcoming self-defeating behaviors (e.g., fear, greed and bias). The lessons could not be more timely given today’s excessive valuations.