What the Market Selloff means for Investors

Since President Trump’s tariff announcement last week, we’ve seen a massive disconnect in the global markets. In fact, over the weekend the stock market has been selling off across multiple countries. It seems that the new U.S. tariff rates are the catalyst for these rolling losses.

The Story from Global Futures

If you’ve been investing for a long time, you eventually come across the Futures market to see how the market is reacting to different stories. Well, over the weekend we’ve had some interesting developments across the board.

Since President Trump announced Liberation Day, the market has been in a complete sell off. This has been one of the few times I have seen every single asset move downwards in tangent. Every single major index, from global to domestic, is down almost double-digit over the past few days.

At the moment, I don’t think the bleeding will stop. Investors can expect more aggressive selling until April 9th. The main driver is the markets are unclear how other economies will react to America’s first mover advantage.

Margin calls, mispricings and more

You see, America has been in a tough economic position for the past several decades. We have rebuilt several nations and funded the expansion of many others. These developments were fine when we were a rich, independent country. But now the Trump Administration feels we need to take back control of our nation’s sovereignty.

The domestic problem America is facing is that we rely too much on global trade. Personally, I think globalization peaked in February 2020. This was weeks before Covid became an international pandemic and shut down the global economy. Supply chains for every country came to a halt and everyone was forced to focus on their own sovereignty. I don’t think most nations have faced the challenges with sovereignty since the early 1900s.

The problem with relying on other countries for critical goods and services, is that we are at the mercy of other governments. This is fine for discretionary goods but unacceptable when it comes to mission critical products such as defense and medical supplies. The global economy has experienced both of these challenges during the past 4-5 years. The wars in Ukraine and Israel have shown the world how important defense supply chains are to domestic economies.

At the moment, the U.S. is in a good position. We are a strong nation with a healthy economy. But the major sell off in the S&P and Nasdaq are telling us that investors weren’t prepared for this downturn. Which is surprising because President Trump has mentioned tariffs for decades.

Since November 2024, the markets had been performing quite well. The S&P 500 peaked at 6,144 on February 19th. President Trump’s first month in office was viewed as very bullish for investors.

However all of this quickly changed as the Administration began to roll out new policies for the economy. One of them being Liberation Day last week.

This news came as a surprise to no one but the rollout was shocking. I think foreign nations and companies are working out how to work around these new trade policies. Which is why the market has been selling off for the past few days.

Tariffs mean rising costs for everyone across the globe. We don’t know these costs will be priced, and we don’t know which tariffs will be reversed. Several nations have already approached the White House about negotiating new trade agreements. But investors don’t like this level of uncertainty. Rising costs are hard to predict when projecting future returns. Which makes mispricing an opportunity for investors.

At the moment, I think the market selloff will continue. There will be several industries less susceptible to tariffs (i.e. technology) but that’s a small sub-sector. Right now I think it’s important to observe which industries are selling and why. If the market sell off continues for another week, it might mean investors are deleveraging risk across the board. Some of those investment funds might experience margin calls which results in forced selling. Which means investors will be forced to unwind positions that are unaffected by tariffs. This will create new opportunities for investors buying into stocks at a lower price. The bottom is coming but we are probably a week away from that noise.