What Will Tariffs Do to the Stock Market?

Editor's note: Fear is ruling the day in the markets. But according to Vic Lederman of our corporate affiliate Chaikin Analytics, that doesn't mean things will look grim forever. In this essay, which has been updated from a recent issue of the free Chaikin PowerFeed e-letter, Vic explains how U.S. politics have taken their toll on the markets – and hints at what history shows could come next.

Folks, I don't like "talking politics" when it comes to investing...

After all, there's a big difference between promises... and outcomes.

It doesn't matter what side of the political aisle you're on. We all know that politicians don't deliver on most of their promises.

And often the things they do accomplish end up watered down. That's just how the system works.

Despite that, President Donald Trump has made some big promises...

The tariff decisions are one of the biggest examples. They're transforming America's relationships with its allies.

Trump's tariff announcement on Wednesday, which he had billed as a "Liberation Day," was nothing short of a substantially grand plan. That's his style.

But there's no question that this huge move is making a mess of the markets. Uncertainty and fear have taken over.

To many folks, it feels like nothing is a sure thing when it comes to America's policies. And accordingly, the market has been chaotic.

Now, most are investors wondering, "What's next?" Well, history might give us a hint – and, as you'll see, there are plenty of opportunities out there, even in uncertain times...

The Big Government Shutdown Had Plenty of Fear Priced In

Let me be clear... I don't pretend to see the future. But I am a data guy.

Today's problems may be unprecedented to some degree. Still, America and the markets have been through a lot of political brinkmanship.

Think about it. How many times have we come close to – or actually had – a government shutdown in the past decade?

I bet it's enough that you've lost count. But when one happens, it's a serious event for America.

For instance, I bet you haven't thought about the 2018 to 2019 shutdown in some time. After all, it seems like a distant memory today.

But it was a darn big deal at the time...

Political brinkmanship came to a head. And on December 22, 2018, the federal government "shut down." Of course, it caused a lot of chaos. Politicians blamed each other and tried to control the optics of it.

At the time, Fitch Ratings even said it might consider downgrading America's credit rating.

But looking at the S&P 500 Index back then reveals something interesting...

When the shutdown started, nobody knew how long it would last. And news about the "impending doom" had already filled headlines for weeks beforehand. So it's no wonder that the markets moved lower leading up to December 22.

But look at what happened as the shutdown dragged on... The market moved higher.

Investors had already priced in most of their fear – even though the shutdown ended up lasting a record 35 days.

And 2019 turned out to be a fantastic year for the markets. The S&P 500 soared nearly 29%.

Market Downturns Also Create Opportunities

Now, I don't pretend to know exactly how today's events will play out. But recently, investor sentiment has been about as terrible as it gets.

Could the broad market fall further from here? Sure. There's a lot of new information coming out of the White House that investors are still trying to price in.

But history tells us that these "market ending" events don't always play out like investors expect. And a bit of common sense tells us that's likely to be the case today, too.

Brinkmanship creates a lot of uncertainty. And it does punish the markets.

But importantly, market pullbacks and corrections also create investing opportunities.

So, no matter how you feel about today's politics, I recommend you keep an eye on the markets. And don't run for the hills just yet.

There are a lot of opportunities in the making.

Good investing,

Vic Lederman

Editor's note: Chaikin Analytics founder Marc Chaikin called the last two crashes with shocking precision... And today, he's sounding the alarm about a fundamental shift happening in the U.S. stock market. There's still time to get ready – and that's why Marc is sharing one breakthrough strategy that could potentially double your portfolio, even if the market falls further... Click here to learn more.