𝐌𝐨𝐭𝐢𝐯𝐚𝐭𝐢𝐨𝐧, 𝐰𝐢𝐭𝐡𝐨𝐮𝐭 𝐡𝐲𝐩𝐞𝐫𝐛𝐨𝐥𝐞

I hesitate to speak with hyperboles when talking about investment, because I cannot predict the future. However, on days like these, new investors need a few words of motivation.

I hesitate to speak with hyperboles when talking about investment, because I firmly believe that NO ONE can predict the future.

Black Swan events can occur anytime, we've witnessed a few in the last few years including the COVID virus, the emergence of AI and even the election of Donald Trump, first and second time too. However, on days like these, new investors need a few words of motivation.

What’s happening?

We are expecting to see another red day in the market today. I have warned copiers to expect very high volatility in the early days of Trump presidency. For this reason, I have secured profits and reduced exposure of my portfolio by holding a large cash position. This cash will be deployed to buy the dips. While I continue to remain optimistic for the long run, there is a lot of reasons to be cautious too. It is not good to only play on price action, but also important to understand what is affecting the market trends.

The Root Cause and Possible Fallout

The current volatility seems to be caused by retaliatory tariffs imposed by Canada on goods imported from the US. The tariff war is beginning and it is foolish for anyone to think that the rest of the world will silently accept bullying by Trump and the US. This is what happens when someone proposes a "quick and easy solution" for a complex problem. It is natural for citizens to feel dissatisfied by status-quo and political expediency wins votes easily. We saw this with Brexit, and we will likely see this in upcoming elections in Canada and Germany too. There are real dangers here, and which is why it is important to be very cautious in buying the dips. On the one hand, the market always over-reacts and we may see a small reversal in the coming days, especially if some sort of agreement is struck between US and Canada. But on the other hand, we may see further escalation from Donald Trump who is threatening tariffs on EU as well.

Impact of Inflationary Policies

A full on tariff war can be extremely inflationary for the US, which may force the Fed to increase interest rates in the US. It looks like the US bonds market is feeling anxious about this possibility, which is why the US treasury bonds haven't picked up. When interest rates fall, generally US treasury bonds become more attractive and yields fall. But yields have stayed up, indicating a significant risk that interest rates may go up. This will have a negative impact on demand and investor confidence in the US economy.

In other news

At the same time, we are still reeling from the fallout of the launch of DeepSeek and the industry is still trying to make sense of how it will impact the demand of $NVDA (NVIDIA Corporation) chips and the supremacy of the tech giants $GOOG (Alphabet) , $META (Meta Platforms Inc) and $MSFT (Microsoft) with OpeanAI. We will likely learn more about how these companies react to this challenge in earnings calls in the coming weeks.

Don’t forget!

Even as the situation appears grim, I urge you to not react with panic. It is tempting to short the market. The more you get into the details the worse the problems appear. The bearish opinions always appear to be the smartest. This is just how our brains work. Unfortunately though, the markets very rarely reflect the state of the economy and the sentiments of the society.

In previous posts I have repeatedly explained how increasing interest rates actually make more money flow into the stock market, because people stop investing in real estate and buying expensive things. It is also important to understand that the stock market is under no obligation to behave reasonably in the short term. The stock market still has a lot of attention from YOLOers and FOMOers, who are always want to make a quick buck by playing on price action. They always buy the dips and make the markets rally after a major crash.

Why do we invest?

It is really important to remember the reason why we are investing.

• We are not trying to make a quick buck here and there.

• We are investing for the long term.

• We are putting our hard earned savings to work to prevent the value of our savings from degrading due to inflation.

• We continue to believe in human ingenuity. We continue to believe that free market and capitalism works. We continue to believe that despite who wins elections, it is not going be the end of the world.