That's why I just added Gold and Bitcoin. If we compare with those assets that have lower inflation, it is still just a reduction in equity prices of 30%.
If there is so much new potential downside and no upside - shouldn't equities trade at least 50% lower?
You're underestimating how big a deal 30% is; it'd be like deleting California and saying that just 15% of the US economy had disappeared. It represents a capital allocation misstep of titanic proportions.
But in 2008 we saw the S&P-500 decline 50%. And the Nasdaq-100 30%.
In 2000 the S&P-500 and the Nasdaq-100 both declined 80%.
In dollar terms.
To me it seems that the 2000 dotcom decline and the 2008 financial crisis were once in a decade events and now we are witnessing a once in a lifetime event.
I think anyone who tells you they can make sense of what's happening is being overconfident.
I definitely see where you're coming from expecting a bigger drop, I guess the key thing is that nobody yet is sure what the future of the latest pretty major anouncements looks like, we're currently just seeing bets.
It's possible that tariffs stay high, and US companies like Apple and Nike that depend on global supply chains either relocate, or become outcompeted by foreign companies. In that scenario, I think we'd see a major drop in indexes like the S&P-500, probably out doing the financial crisis in 2008.
It's also possible that the tariffs end up being an overblown bargaining chip, or get walked back as the current US administration realises they are unpopular and loses interest in them. In that case, you'd probably see the S&P take a hit because of the uncertainty, but it's not the same as US companies all finding their supply chains are unworkable.
So I guess the tldr is, shrug, who knows? We're just seeing the market guessing at the moment, the actual economic damage will happen over the next year as things progress more clearly.
> it is still just a reduction in equity prices of 30%.
quantity has a quality of its own. Systems react to large changes. 30% drop without good reason for the drop, just because of a political will of small group (as even the wide field of the Trump supporters seem to be surprised by the scale of the action), is large. And given how fast it happened, the system is only starting to react. Even some Republicans started to move about stripping tariff power from President. The Republicans are going to be judged on the tariff effect in 1.5 years - too little time for any good, if any at all supposed to come, effects, more than enough for the bad ones. And Trump is wiggling and backtracking too. People have always been saying that the Big Money rule the politics. We seem to be testing that theory right now as the Big Money got seriously hit, and we're going to see how much power they have.
That's how inflation works.