Gerry Connor / April 20, 2018

Correction, Transition or Bear Market

Believe in the Easter Bunny? Then maybe you’re an April fool. Believe in foxes, as in “Crazy like One”? Then maybe Trump’s tariff strategy isn’t that bad. OK, my apologies to the foxes.

Nonetheless, tariffs and trade seem to be the latest issue to afflict this market which came shortly after an inflation scare in the form of a higher than expected January wage increase which sent the market to its first correction of over 5% in more than a year.

Although they may seem like uncorrelated issues, they are not. Both factors have an impact on profit margins. But I’ll come back to this shortly because it is the essence of the bear case for this market.
In the meantime, I wonder if this market is like the proverbial bug in search of a windshield; it is looking for a reason to correct and these are the most convenient excuses. Earlier, many thought the market was overvalued and should correct. But, with tax cuts and synchronized global growth, valuations have come back into the reasonable zone.