trigger vs. cause

Sometimes it makes sense to distinguish between the event that triggers a selloff and the (more important) underlying causes that were lurking below the surface waiting for an inciting event to be unleashed.

In this case, the trigger is Trump’s announcements of widespread tariffs on imports. the kind of thing that caused the Great Depression of the 1930s. As I see it, the causes are:

–the least important, the fact that the US stock market had posted 20%+ gains for two years in a row

–the tariffs themselves

–the observation by notable economists that the structure of the tariffs corresponds to what a Chat GDP query would have suggested, rather than being the result of deep thought and knowledge of economics

–Trump’s erratic behavior after the announcement, which suggests substantial cognitive decline that is being covered up. Perhaps the most disturbing of all,

–the tacit approval of Republican congresspeople for measures that will most likely result in slower economic growth and accelerating inflation.

what to do

…better said, “What I’m doing.”

–I’m an aggressive investor, so I’m relatively comfortable having holdings that are substantially different from the structure of the S&P 500. I’m not doing anything to change that structure, but if I were I’d be moving closer to the index

–I’m shopping around. At times like this, everything goes down. Often, strong companies that have made large gains fall the most. So this is a chance to upgrade the portfolio by selling clunkers or somewhat iffy holdings to buy names that I really like but have thought were too expensive before the selloff began. I’ve also been making my portfolio more defensive for six months or so. I’m now trying to reverse that positioning a bit.