r/Bogleheads • u/MonitorJunior3332 • 2d ago
Wasn’t “Liberation Day” priced in?
I’m really not sure why there was such a huge crash on April 3rd. Trump had been saying for weeks that there would be a huge rise in tariffs on April 2nd. Was it really so much worse than expected, or did a lot of investors just not know this was happening until the day of?
1.4k
u/malignantz 2d ago
The whisper number was 10% on all countries, which potentially was priced in. If you noticed, there was a decent jump right before the announcement, which likely had to do with this rumored softening of the hard posture previously taken by the administration.
Then, we got hit with numbers that nobody could have guessed, since they were effectively "made up" / calculated using a bogus formula no economist had seen before.
543
u/jwa0042 2d ago edited 2d ago
Financial Times had a good piece on this.
How do you price in a non-sensical policy? It's always going to be a moving target. The implementation will have to constantly adjust to chase an imaginary target.
https://www.ft.com/content/814ff13f-3e9c-40ba-a923-5c1b6fe95d5c
263
u/ExcelAcolyte 2d ago
The most important lesson any market participant needs to learn is that the market can price in risk but it can not price in uncertainty.
167
u/vollover 2d ago
Uncertainty/insanity. How do we convince other countries and investors they can rely on certainty or stability even if/when he walks this nonsense back? If he's willing to drive us off a cliff, why would anyone assume similar things wouldn't happen again?
81
103
u/VillainNomFour 2d ago
Yep. A total and complete indictment of americans intelligence, decency, and trustworthiness.
8
u/DryPercentage4346 1d ago
Last night on Wall Street Week,former treasury sec Lawrence Summers noted China sees this as huge opportunity due to their cultural revolution years ago. Similarities going on here.
36
u/cossack190 2d ago
buckle up, it's going to be a rough 4 years. Good time to keep your head down and keep buying, but yeah I wouldn't expect things to look great for a while.
112
u/elephantfi 2d ago
I think this will have repercussions long after 4 yrs. The American dominance was built on stability following WWII. To the rest of the world we have lost our minds and are no longer a safe haven.
→ More replies (6)2
u/CharacterAssistant85 1d ago
What do people do that are retired and are counting on investment income? Or those close to retirement? I'm 5 years out and can't imagine what things will be like 5-10 years from now
→ More replies (1)→ More replies (14)4
u/littlebobbytables9 2d ago
That doesn't make any sense.
→ More replies (1)18
u/NotYourFathersEdits 2d ago
It does, but it's slippery. Risk vs. uncertainty is a distinction in economic theory between proabilities that can be known or unknown. My impression is that the term "risk" is used loosely in finance to cover both. In the empirical physical sciences, "uncertainty" is something that can be quantified and propagated using a calculus of variations having estimated the precision of measurements.
→ More replies (6)62
u/SuchCattle2750 2d ago
This is an investor email sent out to UBS clients. The big boys are still holding out hope these will be overturned in short terms. So if you really want to be quaking in your boots, even as of 4/2, institutions aren't pricing in the full tariff impact:
In the weeks ahead we expect the White House’s executive authority to be challenged in the courts. The President announced the tariffs using the International Emergency Economic Powers Act (IEEPA), which hasn’t previously been utilized to announce such sweeping changes to economic policy. Furthermore, businesses are likely to intensify lobbying efforts. And political pressure to ease tariffs could mount as economic costs rise.
In our base case (to which we assign a 50% probability), we would expect tariffs to be reduced from the levels announced by the President. The President himself invited negotiations, and Treasury Secretary Bessent said in a Bloomberg interview that the announced tariffs are “the high end of the number” and that countries could take steps to bring tariffs down.
19
u/OriginalCompetitive 2d ago
This is correct. The truth is that even now, the market is still over priced compared to historical averages (CAPE, etc.). That arguably made sense when investors believed the optimistic case that good things were happening (AI, tax cuts and deregulation, etc.). But if the tariffs stick, I would expect the market valuation to plunge all the way down to “underpriced” — and that’s unfortunately still a long way to fall.
2
u/Happy_Menu_6239 2d ago
Disagree. They'll come back with trepidation in my opinion. Much easier to hit pause and wait then set up entirely new supply chains and operations. Money will talk and if the best thing to do is attempt to resume normal operations if the tariffs are reduced then that will likely happen.
13
u/IntelligentRent7602 2d ago
Doesn’t matter if they go lower. Foreign investment isn’t coming back anytime soon.
→ More replies (3)2
u/rep3t3 1d ago
Congressmen, lobbyists, special interest, the donor class all have money in equities and are starting to panic. In the senate we are starting to see Republicans speak out against these tarifs. I agree with UBS here somethings going to give in the coming weeks especially considering this whole thing is on dubious legal grounds to begin with
117
u/dealchase 2d ago
It's scary actually - there are some people saying that he actually got these tariff figures using ChatGPT/AI as apparently that was coming out with the same absurd formula that was published yesterday.
105
u/QuickAltTab 2d ago
Also, how else do you explain the tariffs on uninhabited islands?
104
u/Ashamed-Status-9668 2d ago
The government used AI to set tariffs on penguins. That statement should not be true but it is.
5
17
u/bongophrog 2d ago
Could be AI, but he also uses “trade deficit” and “tariff” interchangeably. The numbers he cited are the trade deficit, gross numbers of what we buy from them versus what they buy from us.
This is why tiny countries like Botswana and Cambodia have the hardest tariffs, they can’t buy much from us.
44
u/Winter-Ride6230 2d ago
Honestly in any other administration it would be absurd but in this one I can actually believe they would use ChatGPT/AI in this utterly nonsensical way.
→ More replies (1)40
u/mikedave4242 2d ago
Clearly zero thought went into the content of this announcement, which is odd given it's supposed to be to cornerstone of his policy. I think this announcement was serving a completely different purpose where it didn't really matter what the numbers were as long as they shocked everyone.
→ More replies (2)32
u/cossack190 2d ago
Tariffs are bad (imo) but could be implemented in a way that is at least coherent. This is both bad and incoherent. It seems Trump has had a weird obsession with Tariffs going back as far as the 80s. This is way more like him grinding an axe than it is actually building economic policy.
They might as well have been throwing darts at a board of numbers to come up with the proposal.
17
u/OriginalCompetitive 2d ago
This is bad, incoherent — and casual, in the sense that he doesn’t even seem to have tried to get it right. That is in many ways the most dangerous aspect of this. You can fix bad and incoherent. But knowing that the leader of the free world (and whoever is supporting him) is willing to make $6 trillion moves without even checking the most basic of facts — that’s something that cannot be erased.
→ More replies (1)2
u/Coolpop52 1d ago
I've tried to read as many pieces as I can about tarrifs, and I agree. An interesting recommendation that I read was to set up targeted, multi-year deals with companies to bring in foreign investment in sectors having to do with our national security (semiconductors, raw materials for medicine, etc).
This would have
- Been more plalatable
- Given companies a timeline for bringing things over without the "shock and awe"
- Still allowed for the carrot and the stick method (carrot for setting up, stick in a few years if companies haven't started moving things over).
Unfortunately, we went the complete opposite way.
→ More replies (1)2
→ More replies (3)2
u/Deviathan 1d ago
It's probably not Trump himself, but a staffer tasked with this. Staffer probably used chatgpt 5 minutes before it was due, and Trump applauded how thorough it looked.
7
u/emprobabale 2d ago
The main take away when discussing “priced in” like OP is, is that it’s a useless comment 99% of the time.
The market may have participants who have thought of all outcomes and move accordingly, but that doesn’t mean every thought is “priced in.”
→ More replies (4)16
u/Digitalispurpurea2 2d ago
Hopefully Trump will “magnanimously” agree to negotiate these numbers down to the whisper number just to get countries to kiss the ring and the market will recover nicely
33
u/Yukas911 2d ago
He's put himself in a position of weakness versus the whole world at once. Countries will not be lining up to kiss the ring to bail him out. He gave up his leverage in one day.
59
→ More replies (2)28
u/borgeron 2d ago
Errr no. The problem is the things the admin are demanding countries do to reduce the tariffs are so politically untenable within those nations that negotiating simply wont happen.
Trump is trying to erase all the other trade impediments that countries put up that often benefit people within those nations greatly. And voters in those countries are not as stupid as American voters.
I know this because they demanded Australia dismantle its biosecurity laws AND its pharma benefits scheme. Two things that are absolutely not negotiable for the Australian public.
The worldwide disdain for America is now off the charts.
5
2
u/Johnny-Virgil 2d ago
What’s the pharma benefits scheme?
9
u/Happy_Menu_6239 2d ago
A program where Australia subsidises medications and regulates prices to ensure affordable, universal access to essential medications
2
426
u/Kitchen_Catch3183 2d ago
Tariffing Heart Island, a territory with a population of 0, was not priced in.
277
u/Majestic-Macaron6019 2d ago
Those penguins know what they did
88
u/MidwestGeek52 2d ago
Was it a 10% tuxedo tax?
42
u/Stalking_Goat 2d ago
No, it is that they are flagrantly ignoring the treaties regarding sustainable fishing. They aren't even reporting their catch numbers to the South Pacific Regional Fisheries Management Organization!
23
u/ColdAttempt954 2d ago
bruh im so slow i was like but there arent any people and yeah you meant the penguins fml im dumb
20
u/Devildiver21 2d ago
if i had money to spare i would buy you a beer, but i am slowly losing my networth each day w this clown
34
2
21
u/Supreme_Mediocrity 2d ago
Also the US finally, inadvertently, recognizing Taiwan as a country. After all these years of the US eating their cake and having it too, no one would have guessed someone would find a way to piss off China AND Taiwan at the same time... And to gain nothing from it...
→ More replies (3)9
299
u/buffinita 2d ago
tariffs were higher and more countries were targeted than expected; retaliatory responses from other nations has been faster
27
5
30
u/HDauthentic 2d ago
China was pretty impressively fast, I suppose that is a “benefit” of their governmental structure
→ More replies (1)
149
2d ago
[deleted]
22
3
48
u/KitsapTrotter 2d ago
IMO there is a lot of chaos right now. Nobody knows WTF is going to happen. The market *hates* uncertainty with a passion.
199
u/Kashmir79 MOD 5 2d ago edited 2d ago
As with all anticipated future events, a probability was priced in, not a 100% certainty. The market makes best guesses using the wisdom of the crowd but it can’t predict the future.
62
u/meep_42 2d ago
And Trump has signaled stuff (including tariffs) and pulled back numerous times since 2016 and this year in particular. It was entirely possible that he got some "concession" and changed his mind or they were less (or more!) severe than this.
29
u/Kashmir79 MOD 5 2d ago
And it’s still possible this gets rolled back. Obviously damage is already done but you can never assume any stated policy is both certain and permanent. Market pricing reflects our collective best guess
26
u/damn_lies 2d ago edited 2d ago
It is still pricing in a probability of a roll back though it normally overreacts initially too. Damage is possibly still coming.
16
u/GoodOmens 2d ago
More tariffs go into effect Saturday I think. If there is no murmur of pull back over the weekend I imagine Monday is going to be another blood bath.
→ More replies (1)20
u/Kashmir79 MOD 5 2d ago
Normal market behavior. The market gradually gets overly optimistic that nothing could possibly go wrong and valuations get way above the historical mean, and then something goes terribly wrong and it dramatically re-prices (yes typically by overreacting) with lower expectations. You’ll see your portfolio value get higher and lower many times over the course of your investing career, and the world will experience wild economic and geopolitical convulsions, yet global equities almost always wind up with 5-8% returns over 20-30 year periods. Stay the course buddies
5
u/GrowthProfitGrofit 2d ago
It's also pricing in the possibility of any number of financial machinations that prevent this from turning into a full blown recession. Or even that Trump simply decides to repeat 2020 and switch the money printer to full blast.
20
u/meep_42 2d ago
The policy can be rolled back, but other countries will find it hard to trust / rely on US policy for many years (decades?) into the future. Consistency of policy / actions is a bedrock of free trade and game theory. The US is learning how bad tit-for-tat can go when it goes bad.
15
u/eng2016a 2d ago
even if these all get rolled back tomorrow the damage to credibility has been done for good, and will take a long time to get back. the structure that has underpinned the entire thesis of the US market being a safe haven is at risk here. There was the understanding that whoever was in charge, they would mostly act to at least make a stable and predictable business environment (regardless of whatever party), and not do things like make arbitrary demands of trade partners and demand personal fealty to get concessions from strict punishments
investing international will hopefully help, even if in the short term the international stocks are very much tied to our market in some ways. but I guarantee you all our trade partners as of a month ago are trying to figure out ways to decouple themselves from our sphere at least partially, so that should just be more motivation to do the whole pie, a good 30-40 in total international to go along with your home market
→ More replies (1)3
u/enunymous 2d ago
This is correct... The difference between a 60% probability of tariffs that could quickly be delayed or revoked and a 100% definitive outcome without any immediate withdrawal will change the market.
→ More replies (2)2
u/BejahungEnjoyer 2d ago
This isn't true, you can see the implied weekly move based on the vix / SPX option prices and +/- 10% was not even remotely expected.
35
u/Cold-Common7001 2d ago
Financial type people cannot believe that Trump actually wants these tariffs and tie themselves into knots making arguments that he isn't actually serious about them. Many of the posts here have been full of this projection.
117
u/_digduggler_ 2d ago
All reporting was that no one thought it would be this large and on so many countries. So no. And by all reports they didn't even decide what they were going to do until the day of. This was all literally made up on the fly.
11
→ More replies (2)26
2d ago
[removed] — view removed comment
25
2d ago
[removed] — view removed comment
30
u/MetallicGray 2d ago
They're all ridiculously wealthy enough that they'll just dump their wealth into a 10% discounted market at the expense of 99.9% of the rest of the country. People love to get satisfaction out the billions Elon is losing, but don't realize he's just set up to gain even more back. On top of that, the guy could literally lose hundreds of billions of dollars and not a single thing in his life, luxury, or comfort would change.
When someone (like the wealthy people in the executive) quite literally will *never* have to worry about housing, food, jobs, income, retirement, etc. and can still buy a yacht even on the worst days of a recession, then it's all just a game to them. They have no perspective or even a care about how stuff affects average Americans.
→ More replies (2)2
18
u/GermsAndNumbers 2d ago
"They asked ChatGPT and used a list of top level domains instead of countries" is pretty hard to price in.
→ More replies (1)
18
u/dunDunDUNNN 2d ago
No. As with everything Trump does, you never know how bad it's going to be until he actually does it. That's generally because he doesn't have a plan and just has to try to keep up with the barrage of horseshit that continually flies out of his mouth.
39
u/StatisticalMan 2d ago edited 2d ago
Nothing is ever priced in fully because the future is not known with certainty. Probabilities are priced in so things are partially priced in. It is why the market has been trending sideways to downard since innaguration day. However once released likely became certainty. Also the gpt moron math behind it combined with the staggering scope was beyond what most people thought.
The reality is it went from "likely and somewhat bad" to "certainty and asininely stupid". The market reacted to change in forward outlook. If we get some moderation of the lunacy the market may go up. The market having a sustained recovery doesn't mean the outlook is necessarily good just less bad.
16
u/timmyd79 2d ago
An “undo” button is a highly bullish and optimistic take as at this point a good bit of damage has been done. Boomers now worry about their retirement and needing to stay employed x more years. This will easily waterfall into muted consumer spending which then waterfalls into job losses.
I was like the rest of greedy wall street thinking things would be somewhat bad but not 3rd graders with crayons tariff plan bad. There was some hope that the Trump admin would at least lean a bit on Bessent or Lutnick but the reveal showed something dangerous and that is people smarter than Trump are buying into his cult of personality so much to become vapid yes men.
41
u/Str8truth 2d ago
Trump promised reciprocal tariffs, which everyone understood to be US tariffs that reflected foreign tariffs. Instead, he decreed unilateral tariffs based on trade imbalances, not foreign tariffs. Never mind that Lesotho sells us a lot of cheap diamonds and denim and has little money to buy expensive American goods, it got socked with a 50% tariff. The tariffs are not based on any coherent economic theory, but only on Trump's whimsical and ignorant preconceptions about trade.
→ More replies (1)
32
30
u/InnerKookaburra 2d ago
Others have covered that the tariffs were much worse and more non-sensical than expected, but there is another factor that is affecting the markets:
Many countries are now actively figuring out how to realign their trade so that the US is not a part of it or is significantly reduced. This could lead to very negative long-term consequences for US businesses and the US economy (jobs/income and consumer prices)
Imagine you work at a fast food restaurant and the owner decides to appoint their son as store manager. In his first week on the job he puts a new policy in place that every customer has to say "thank you, Mr. Manager" before they are given their food. If the food is tasty enough or it's close to where the customers live maybe they put up with it and chalk it up to some eccentricities.
However, in the second week on the job he puts another policy in place that requires all customers have to fill out a written form expressing their admiration for the store manager and pay a burger tax of $3 every time they order. Some don't want to take the time to fill out the form, some don't want to pay the $3 and now customers start to look around. They had been loyal to the restaurant, many of them for years, but this is too much.
Within a few weeks most of the customers have found that there are other good restaurants they can go to, some of them even prefer those new restaurants, so even if the owner eventually fires their son those customers are probably gone for good. Plus the Yelp reviews suck and word spreads.
Even if the general manager rescinds the policies shortly thereafter, many of the customers are spooked and don't want to buy food from crazy people. Who knows what they'll do next week.
5
u/goldensnow24 1d ago
In this situation the smart thing to do would be to close down the restaurant, then reopen and rebrand the restaurant completely. Gives you a clean slate with the yelp reviews too. Unfortunately America can’t do that lol.
13
u/Frosti11icus 2d ago
For some reason no one thought he would go through with it cause most people cannot fathom the thought process that goes into making these decisions.
36
u/FIREful_symmetry 2d ago
Also, he lies.
So people don't assume he is going to keep his word until he actually does it.
4
u/uselesslogin 2d ago
That might be the bigger one. I mean another delay was well within possibilities.
11
u/Dry-Abbreviations-92 2d ago
The tariffs made way less sense than anticipated. And then the reaction of china was also not necessarily priced in.
→ More replies (1)
16
u/filbo132 2d ago
The market is in full blown panic right now. I am still surprised that they haven't halted a trading day like in '08-09.
8
4
u/Jazzputin 2d ago
IIRC 7% drop causes a 15 minute cool down and a 10% drop shuts it down for the day.
9
u/michal939 2d ago
7% and 13% are 15 minutes, 20% is full shutdown and it have never happened (yet).
23
u/FearlessMode2104 2d ago
I think the news was much worse than what the market expected.
→ More replies (1)
9
u/padphilosopher 2d ago
The size of the tariffs as well as the arbitrary way in which they were determined was not priced in. If the tariffs were truly reciprocal they would have been much much much lower.
9
u/Chef_Boyard33 2d ago
Not only did some not even believe Trump would follow through, but the execution itself is also completely arbitrary and last-minute
9
u/Hangman4358 2d ago
Markets hate uncertainty, and currently, we have an agent of chaos making up stuff on the fly.
On Monday, we can have news that all the tariffs are gone, or maybe we could have an announcement that Marines are invading Puerto Rico to fight gay pigs sent by Sweden to help Iran overthrow the government in Tuvalu. At this rate, both of those are equally plausible
15
u/SWPenn 2d ago
How can you price in an unstable president, who changes his mind from one day to the next? Nobody was sure what was coming because it could change at any moment.
This is a man-made financial crisis started by one man. Nobody in Congress is acting with any urgency. The Constitution gives Congress explicit power over tariffs. They need to act, and fast.
7
u/Cold_Art5051 1d ago
It was much worse than expected. In the Trump 1 administration the tariffs raised Chinese tariffs by about 1.5%. That was disruptive to the relationship but a pimple on the butt of the economy. This is much more radical and far greater than anyone expected
14
u/JonstheSquire 2d ago
You can't price in anything Trump is going to do because he lies all the time about what he is going to do. A lot of people thought April 2 would be a total dud and he would basically announce nothing of substance. Instead, it announced far worse tariffs than almost anyone was expecting considering he was talking about reciprocal tariffs. These tariffs are much higher than anything that any reason person would consider reciprocal.
6
u/Ctrl-Meta-Percent 2d ago
The market price is not psychic - it reflects an aggregation of predictions across the population of investors. There was obviously a spread of opinions regarding the magnitude and extent of the tariffs was known. Based on recent behavior - maybe no new tariffs at all!
And, sometimes unlikely events actually occur.
Have you seen the Gamecast "Win Probability" charts you can view as a game progresses for ESPN? There can be really wild swings as events get "priced into" the probability of an outcome over the course of the game.
3
8
u/ivobrick 2d ago
I don't understand how you can continue benefit from your trade partners stopped trading with you, forced by you.
Now we have two options, stop trades with usa altogether ( some companies will do ), and find a new market ( asia, sa, south usa, ) which we did.
Or sell at the brutal price noone in usa buys.
It's not a fun anymore, expect total drop 40 - 60%. Expect layoffs and price increases, inflation. It will be a miracle if USA can make 1 full car alone this year.
This is only from a dull EU point of view, asians are much more angrier.
You are not the only one that got demolished today, we got exact same hit -5 % -1% on euro.
I know its not your fault, but if this is not cancelled soon, it will be even bigger pop.
7
u/evey_17 2d ago edited 2d ago
The math is wacko and people did not see that coming. They were not reciprocal. Vietnam and Cambodia were singled out with new tariffs of 46 percent and 49 percent. Vietnam had agree to zero prior. Jim Cramer stated the numbers are ridiculous and people working for him should known better.
7
u/UpwardlyGlobal 2d ago
Now it's definitely just a shakedown. He will destroy the world to feel like he's important
13
u/softnmushy 2d ago
Your question indicates you don't really understand how badly these tariffs are going to affect the economy. If Trump keeps them in place, it will probably put the US into a 1930's style depression.
So, everyone assumed he was bluffing. Instead, his tariffs are higher than anyone predicted and he seems intent on keeping them in place.
13
u/BejahungEnjoyer 2d ago
Nobody knows, not even his inner circle. At this point, even if he reverses course next week, the damage is done. Trust is broken with the international community and domestic business leaders. And we are still in the third month.
4
7
u/wonkalicious808 2d ago
That's what I expected too, but I guess the capricious idiot was given way more credit than deserved.
Oh well, buy when you can. Clearly we're not good at predicting the future and timing the market.
5
u/PineappleOk3364 2d ago
The problem with tariffs is that they have knock on effects and retaliations. How many actions and reactions can really be priced in?
6
u/Silent-Carry-4617 2d ago
It's hard to predict trump. It was probable he could have backtracked or do "kinder" tariffs.
I don't think people imagined "kinder" tariffs to mean 20-30%.
And a blanket 10% minimum is insane.
It was much higher than people expected. Even JPow said that.
6
6
u/Difficult-Ad4364 1d ago
Tariffs were priced in. Completely unhinged way of calculating tariffs were not. It’s the economic uncertainty that is increasing the volatility.
9
u/Newtronic 2d ago
I’ve lived through a lot (80’s inflation, y2k scare, internet crash, Great Recession, Covid) and this is the first time I went against my Bogle training. This time it is really different. This time there’s a maniac steering the boat and all the controls that were there the first time around are gone. I went to 1/3 cash in January. First time ever that i haven’t been 100% equity. I wasn’t pessimistic enough.
5
5
u/alfalfa-as-fuck 2d ago
Wall Street thought it was bluster, that at the end of the day he’d take care of them. They were wrong.
5
u/icefire9 2d ago
Imo the tariffs still aren't priced in. Many investors think that Trump will reduce them/backpedal, or that its all a negotiating tactic and deals will be worked out. Assuming the tariffs stay, the market still has a ways to drop.
5
u/jlynn121 2d ago
I think we also got hit with some serious margin calls today. I thought we’d see some recovery today, but it’s a falling knife right now. Sprinkled a little money on VTI and Rivian for spectating, but still largely in cash and Bond ETF.
5
u/Sheerbucket 2d ago
The man says a lot more than he actually does. People thought as adults in the room would stop the worst from happening.
9
u/PsylentKnight 2d ago
Lots of people were in denial and saying the tariffs were just a negotiation tactic
→ More replies (1)2
4
u/phoenixmatrix 2d ago
A lot of people expected something, anything, to happen. The market is as emotional as the humans trading within it, and there's a lot of coping going on.
I expected it to be bad but not this bad, personally.
3
u/breadexpert69 2d ago
Well a lot of people thought that Trump would not follow through or that he would do it in a much smaller scale. Its Trump, he says a bunch of sht all the time that isnt true and that he wont ever do.
The problem is this time he instead doubled down and made it worse than anyone was even anticipating.
If this was an administration that made plans in anticipation and communicated those plans with the country before doing anything this extreme then you would be right. But we are dealing with an administration that procrastinates and is unpredictable. And unpredictability is usually not a thing you want to associate with the economy.
3
u/QuestionableTaste009 2d ago
Some tough talk and maybe negotiation around concrete trade agreements that might (or might not) help the US was priced in.
The stupidity of the tariff calculation method, and what it showed about the competence and utter unseriousness of the entire endeavor from the current administration, as well as the implications around futility of future trade negotiations was not priced in.
https://paulkrugman.substack.com/p/will-careless-stupidity-kill-the
4
5
9
u/cohibakick 2d ago
Part of the issue is that this is all nonsense. No one was exactly sure of what trump was going to do. And as information comes out things become even more unworkable.
15
u/EJF_France 2d ago
Almost no one could have foreseen this kind ham-handed buffoonery. Ham-handed buffoonery is kinda on brand. Taxing us consumers for zero gain was unforeseen. This across the board penalty does nothing to prevent Chinese ascension (penalizes potential allies - Vietnam, Japan, etc). And does nothing to grow strategic industries - (steel, semiconductors exempted).
We have a moron leading us to oblivion.
10
4
3
u/Number127 2d ago
Almost no one could have foreseen this kind ham-handed buffoonery. Ham-handed buffoonery is kinda on brand.
Those two statements are at odds with one another.
3
u/paulsiu 2d ago
Keep what people expect and what people actually get may not be the same. The market went up before the announcement because people they thought the president would just use the tariff as a negotiation tactic. Few expected what the president is proposing.
A similar analogy is that inflation is priced into the return on nominal bonds, but this is just an estimate. The estimate are likely to have some basis in reality, and could be pretty close, but it can be grossly wrong.
3
u/This-Salt-2754 2d ago
He threatened them and retracted them many times… no chance they were truly priced in. And nobody knew how large the tariffs would be. We are talking about a complete reversal of 30 years of globalization in the span of a few months. You can brace for it but you can’t just “price it in”
3
3
u/curious_investing 2d ago
Many thought it was just a negotiating tool, and he would backtrack as countries negotiated with him. Others thought he wouldn't go this far.
3
u/PlausibleAnecdote 2d ago
It was priced in *to the extend anyone could know what would happen*
Priced in does not mean markets won't go up or down, even suddenly.
It means that any special insight you think you have is baked in, alongside all the other public information and insights you didn't think of yet.
* So, if you were part of Trump's inner circle and knew the (crazy) tariff rates before they were shared, you could have made special trades and gotten ahead because THAT information was not baked in.
3
u/Putrid_Pollution3455 2d ago
Thought that he was bluffing. Not priced in. Everyone waiting and seeing which is why market basically went sideways for awhile and subtly exposed that double top. As always no one knows the future and we were due to a correction and sector rotation
3
u/metro-boomin34 2d ago
It was worse than expected so markets crashed. Everyone says everything is priced in. In my experience, nothing is fully priced in until reality hits
3
u/Okinawa_Mike 2d ago
Nothing is ever completely priced in until after the event. Until it happens, it's only speculation...no matter what they say. Plus, when you factor in the uncertainty of this particular person, you really don't know what to expect.
3
u/KLKCAhBoy90 2d ago
It was priced in but so was the possibility of Trump changing his mind.
The market is made up of many different varying opinions so it is never 100% priced in because there will always be people sitting on the fence or have opposing viewpoints on a matter.
3
u/kwalitykontrol1 1d ago
No one knew what percentages he would do and they didn't know if he would change his mind. He is completely unpredictable. He would cancel it all next week. God knows.
4
8
u/bearcatgary 2d ago
Nobody could have predicted that Trumps tariffs would be calculated using trade deficits and have nothing to do with the tariffs other countries are placing on our goods.
TLDR: The market discovered Trump is even more ignorant than previously thought.
→ More replies (1)
2
2
2
2
u/Ok-Language5916 2d ago
Nothing is every fully priced in, especially if people don't believe it'll happen.
Somebody is always hedging their bets.
A lot of people were betting that Trump would back down on tariffs. They were wrong. Once he pulled the trigger, a lot of them decided to stop hedging.
2
2
2
u/PretendSet9704 2d ago
I'll probably get downvoted for saying this but a believe a good majority of the tariffs were priced in and hedged, yet the policy / decisions were changed more than once. No one seems to be mentioning the unwinding of the yen carry trade. BOJ is going to hike rates sooner than later, the US has a good chance of cutting rates; being over-leveraged in a time like this is just asking for the worst.
2
u/Sharkwatcher314 1d ago
A fair number of people really thought it was pure negotiation tactic and thought it would be thrown out closer to the deadline and didn’t expect it to go through so it wasn’t fully priced in. Separately it was hard to know other countries retaliation so that is really hard to price in.
Overall just a mess for a multitude of reasons
4
u/sev45day 2d ago
The number of people in this thread that are seeming to say it's the market/investors fault instead of the tariffs is crazy to me.
Tariffs are an absolutely terrible idea in the first place, add to that the horrible execution, then sprinkle it with obvious signs not even the president's staff know exactly what's going on, with a nice sauce on top of retaliation and messaging of other countries starting to work together to cut US trade out entirely....
It is not surprising in any way how the market is responding.
2
u/GweenRoll 1d ago
Everyone knows that the tariffs are bad, but people are trying to explain why the market hasn't priced it in.
No one is saying it's the market's fault generally.
3
u/wisdomoftheages36 2d ago
No offense but this is a stupid question. Look at the results and ask yourself…
was it priced in?
2
2
u/Threeseriesforthewin 2d ago
Let's say Ford goes out of business in three weeks. No, Ford was not priced at 0 last week
0
u/ReflexPoint 2d ago
Well maybe the people claiming it's priced in don't know what the hell they're talking about.
1
u/RickJWagner 2d ago
Note that the Shiller ratio is STILL at 33.
Stocks had little to no room upward and lots of room to fall.
1
1
u/SuspendedAwareness15 2d ago
No. Things like this never can be priced in. Also for some reason millions of people assumed Trump wasn't going to do the thing he kept saying he was going to do.
1
u/PIK_Toggle 2d ago
SPX straddle for Thursday was priced at $85. That was the implied move that was priced in…
1
u/subywesmitch 2d ago
No, they weren't. People either thought Trump was bluffing or it wasn't going to be as bad as it was. I don't really know why they thought that because I expected the worst.
1
u/kunzinator 2d ago
I feel like there was a lot of expectation that he would be more lenient with them or even back down a bit like previously. I personally felt sure it was going to happen and happen bad because he gave the day a name. No way he backs down after naming the day.
1
u/pAusEmak 2d ago
Who knows? Warren Buffett sold over $143 billion in stocks long before Trump said or did anything.
1
1
•
u/FMCTandP MOD 3 2d ago
Mod note: please remember that comments in this sub must be more financial than political and no more partisan than absolutely necessary.