With the first salvos being fired in a potential Sino-American trade war, the Fed boosting the funds rate another quarter point (now 1.5% to 1.75%) and the president stirring the pot in what appears to be his own war of deflection, what’s an investor to do? The only winners here seem to be the media as all of the above appear to raise angst in the consuming public and, therefore, viewership and readership.
What investors (more likely traders) are doing is voting with their feet, running, not walking, away from stocks as evidenced by a Dow Jones Industrials that lost over 1150 points between Thursday’s opening and Friday’s closing (-4.6%). This puts that index firmly in correction territory (-11.6%). The weekly losses for the Dow, S&P 500 and Nasdaq were 5.75% 5.9% and 6.5% respectively.
I am prompted to step back from the emotion of the moment to try to gain some perspective. First and foremost, considering where we’ve been, this correction is long-overdue and very normal. If for no other reason, this should give you comfort. Regardless, I absolutely hate it when my stocks go down. So, let’s examine the issues that pummeled the market last week.
The following segment of my post may ring very political to some. It is not meant to be. It is just my effort to describe the effect of the current fast pace of changes, developments and tweets emanating from the White House.
It is not hard to see that the president is being confronted with potential serious legal issues not only from the Special Prosecutor but from outside causes and peccadillos that predate his presidency. With each new leak/revelation there seems to be corresponding distracting events and/or tweets that deflect attention.
Last week we had two of the presidents alleged paramours (one with a very prominent and visible attorney) front and center and the whole Cambridge Analytica/Facebook story dominating the media. The counterpoints were the firing of the Secretary of State, the expected (but hastily sped up) resignation of the national security advisor (Mr. Bolton learned about being designated NSC chief while being interviewed on Fox news), the out-of-the-blue move to impose new tariffs on China and the ‘I might not sign the spending bill’ moment last Friday.