As for its potential immediate impact on the equity market overall, here’s from this week’s message we posted Tuesday:

“From the get go we have voiced our concerns herein on the risk of the President making good on his protectionist threats.”

“….we didn’t have to be rocket scientists to predict in our year-end letter and multiple other places that the market — despite a strongly bullish macro backdrop — is going to like tariffs like you and I like migraine headaches.”

In yesterday’s update we noted that stocks seemed to respond positively to a rumor that there’d be some positive wiggle room in the pending tariff scheme targeted at China:

“The measures unveiled Thursday will not include restrictions on Chinese investment in the U.S. or student visas. President Donald Trump will be briefed again in two weeks to consider more actions based on the effects of the first phase, the sources said. The president worries the measures could hit American universities too hard, according to the sources.”

Since then White House trade advisers have walked that back and have made it very clear that, if not initially, it’s highly likely that the measures will ultimately include such restrictions. So, alas, it would appear that — contrary to what we were thinking yesterday — the market has more work to do to educate this President and his advisers on the importance of global capital flow and of how the U.S. equity market has reflected our leadership roll in that regard historically.


As I type, Dow futures are pointing to a 180 point drop at the open, virtually the same percent-wise for the S&P 500, and a 1.2% hit to the Nasdaq (which would be 300 points in Dow terms). Frankly, if that were the extent of the market’s reaction, I’d say short-term bulls got off very easy…


So how will we here at PWA manage our clients portfolios through this uncertainty? 


First of all, and most of all, note the previous reference to “short-term” market players; that’s not us. We don’t put our clients’ short-term money into the market. The market is where we strive to achieve our objective of long-term growth of capital, understanding that such achievement forever comes with periods of volatility; intense volatility at times. 


I know that for many of you that last paragraph is all you need to know; you would be long-time clients whom we’ve managed through at least one, many of you both, of the two greatest bear markets since the Great Depression. The rest of you whom we’ve engaged with since might be wondering if our plan is to simply sit tight and ride out intense times without any measurable adjustments to your portfolios, or will we somehow react to the volatility in an attempt to mitigate some of the potential downside? 


Well, frankly, the answer is, it depends. It depends on our view of general conditions; which we’ll illustrate via video and send to you a little later this morning….