The Barefoot Investor has suggested the worst could still be yet to come on the stock market following US President Donald Trump’s Liberation Day tariffs.
Scott Pape has been inundated with emails from concerned investors after Australia was hit with a 10 per cent tariff on all imports to the US as part of a global tariff regime.
‘Less than fifty days ago, my inbox was chock-a-block with emails like this one: “HELP, My share portfolio is getting smashed”,’ he said.
‘”On the news last night Alan Kohler said that Trump’s Liberation Day tariffs are much higher than the Smoot-Hawley tariffs that caused the GREAT DEPRESSION! Is it time to sell?”.’
Mr Pape said the share market was ’16 per cent off its highs’ and suffered its biggest one-day drop in five years when Trump’s tariffs were announced on April 7.
Mr Pape correctly predicted Trump would concede in some way, pausing the tariffs for 90 days for most countries including Australia.
‘This caused the market to roar back as if nothing had happened. And all those worried emails? They stopped coming,’ he said.
In a worrying comparison, Mr Pape said the situation reminded him of the Great Depression’s Black Monday in October 1929.
The Barefoot Investor Scott Pape has been inundated with emails from concerned Aussies after the country was hit with a 10 percent tariff on all imports to the US
US President Donald Trump’s Liberation Day shocked the world
‘You’ve probably seen that iconic photo of the poor bloke trying to flog his luxury car for $100 on the streets of New York. The sign on the bonnet read: “Lost all on the stock market”,’ he said.
‘Yet here’s what most people don’t know: By April 1930, the stock market had bounced back… it was up 48 percent from the October lows.
‘US President Herbert Hoover boldly declared to the world that “the worst is over”. Phew! Yet, as soon as those words left his lips, the market began puking. Violently. And it kept chundering for the next two long years.
‘When it finally lifted its head from the toilet bowl, the share market had dropped a staggering 89 percent from its 1929 peak.’
Despite the gloomy prediction, Mr Pape reassured investors the world is not ‘on the verge of the greatest crash in history’.
‘What I am saying is that humans have short memories. (Okay, and that US presidents cannot be trusted.) Arguably the world’s shrewdest banker, JP Morgan chief Jamie Dimon, agrees,’ he continued.
Mr Dimon suggested the US hadn’t yet felt the effects of the Trump tariffs.
A Wall Street speculator tries to sell his car for $100 after losing all his money in the 1929 stock market crash
‘The market came down 10 per cent, it’s back up 10 per cent. I think that’s an extraordinary amount of complacency,’ Mr Dimon said.
Mr Pape warned Aussie investors to be prepared for stock markets to be even more unpredictable while Trump remains in power.
‘The fact is that Trump has three more years in the Oval Office, and what about this guy says, “I’m just going to go about things quietly, diligently and make no waves”?’ he said.
‘My guess is that he’ll get even crazier as the days tick down.
‘Now, if you’re like me and you got through the Trump tariff tantrum without checking your portfolio, you’re probably good to go with whatever comes next,’ Mr Pape said.
‘However, if you were one of those people sending me anxious emails fifty days ago – consider this your “do over”.
‘As Warren Buffett warned investors last week, while the long-term trend is up, “you will see a period in the next 20 years that will be a hair curler compared to anything you’ve seen before”. Plan accordingly. Tread Your Own Path!’
