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When the markets close today, week two of this latest round of tariff troubles will be squarely in the rearview mirror.
Now it's time to come to terms with a fundamental truth of investing: The markets exist as a "discounting mechanism" – meaning that traders and investors take into account the probabilities of future events and price the market today to best reflect those future outcomes.
If that is our active premise – and I believe it should be – then the markets don't really think that the world will erupt into an all-out trade war.
Far from it, in fact. Because, from the highs seven days before the latest tariff salvos, the biggest drop the market could muster was 4.1% from the highest to lowest points of the last month.
As I write this Friday morning, we're only down 1.8% below those lows.
This confirms what we're seeing: that the market doesn't think there's a big probability of a full-blown multilateral trade war.
In any case, it's certainly not currently pricing in much fear.
On the other hand, we're not climbing higher either.
And with two full calendar weeks of trading behind us since the last "tariff tantrum," we're clearly in…
… another box. Of course, if you've been with me for a while, you'll know we've been in this all-too-familiar territory before, albeit for very different reasons.
Let's take a look:
About the Author
Nationally recognized technical trader. Background in engineering, system designs, and risk reduction. 26 years in the markets.