Hopefully these tariffs are already priced in otherwise my 100% sp500 portfolio is going to take an ass beating on Monday morning
I’m not gonna reallocate anything
The big investment managers I deal with said the market was pricing equities assuming the tariffs would not happen or would be of short duration….
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Oh, poop. 
The hedgies have built up a massive short position on US Equities. The main worry is that the tariffs set off a wave of selling and re-balancing away from US equities. Thats when you will see a correction (15% drop?) from the over-valued S&P 500.
I don’t know what your investment time horizon is, but for the next 12-24 months or so, it is very likely to cause some sizeable paper losses on your US Equities portfolio.
I still think going long US makes sense (Trump will be gone eventually and the US will still lead the world economy in many sectors), but given the tariffs being implemented it also makes sense to go with a less concentrated US-specific equity portfolio (less than 40%) over the next few years in order to get a bit of an extra return.
The one thing that is very hard to model long-term (from a macro view) is the impact of the global economy diversifying away from the US trade because of the tariffs. This will be a negative thing for the US over time, but the effects are hard to quantify (very wide confidence intervals and projected damage).
What I’m hearing is buy on Monday morning
USA!
But in all seriousness I am not going to try to time this as with any other market event
I need to sell some investments in order to move them into my tax free savings account. Rather than selling and buying something, I’m thinking about just selling and waiting to buy. A lot of my stuff has gone up a bunch. At some point you’d think mean reversion has to happen.
Tariffs are bad for the average American, but won’t they actually help large US corporations?
It’s effectively about a 100B annual tax increase. That doesn’t sound massive. Stupid policy for sure.
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This is only for Mexico and Canada.
If Trump does the same with EU (and it looks like he wants to) the size will be much larger. As will the economic damage.
EY projected the impact to wipe out half of US economic growth this year.
At this point, it makes sense to try to look forward and diversify a bit more away from US Equities.
So it really depends on how large your exposure is to US Equities.
I agree economic growth in the US will suffer. I’m not convinced it’s a net loss for US corporations.
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Said another way, why would selling US equities and buying EU equities be a smart move.
UK-listed companies have earnings in US Dollars.
If the dollar appreciates (which it likely will during a trade war) you will see their stock prices shift up a bit.
EU companies will see a different effect because they will be harmed by the tariffs (I would argue it will be neutral).
Logic is:
US: Equities down
EU: Equities neutral
UK: Equities up
I have a similar dilemma. I look after my son’s investments and he is considering buying a house with his insurance company accident settlement. His settlement investments, especially the US equities, have soared in value the past two years. A 25% market correction would require he take out a mortgage to buy a house rather than buy it outright.
To sell his equities or not is the question. Of course, there would be capital gains tax payable on the equities sale. We have reduced to about 50% equities given he may have a short investment horizon. US equities are about half his equities.
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I’ve been lowering my investments from around a 65/35 US/international toward 50/50.
Seems like I might’ve been wise to do that sooner. We’ll see, maybe the markets surge because I’m stupid.
The US dollar can get only so strong before it hurts the US’ international competitiveness. Although that might be academic if the US alienates all its trading partners.
I feel like your son has a bit easier decision. He needs the money soon, it’s money he needs to buy his house. He’s going to take the capital gains hit at some point.
In my case, it’s money I hope to leave invested for awhile. I’ve had some massive gains (>500%) on my Kraken Robotics shares. Do I sell those, realizing some gains and move them over to my TFSA. Or do I leave them there and sell some other shares that haven’t grown as much and postpone the capital gains hit on my Kraken share for awhile.
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I definitely see the US dollar apreciating to the extent it gets stronger than parity vs the Euro. Its at 1.02 now so I could see this dropping to 0.90-0.95 over the next 12 months.
After that, it would be very difficult because as you say it would hurt them.
The issue is a bit more complicated than I described. He is not certain if he is even going to buy a house let alone when. It is hard to do investment planning with that uncertainty.
If he decided all he needed was his current one bedroom condo, his long term investment planning would be easy. It is the uncertainty over whether he will need to access a big chunk of money to buy a house that is complicating matters.
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Equity markets should be down tomorrow.
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S&P opens -1.5%, after an initial bump it’s trending lower.
I expect it all the decline to be recouped at some point this week, maybe even today, when either (1) major players start the line of thinking tariffs are bad, but Trump Is Going To Offset Those With Lower Rates AND THAT WILL BE GREAT FOR STOCKS, BECAUSE THEY CAN’T GO UP WITHOUT LOWER RATES - BUY, BUY, BUY!, or (2) Trump lies that both Canada and Mexico have agreed to significant economic concessions and so he’s pausing the tariffs, possibly also inventing some claim that Canada has agreed to enter into negotiations to become the 51st state.
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Apparently Mexico announced it had “a good call” with the WH re: tariffs, and since 10:21 ET the S&P is up 60 points, almost straight up.
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