Beware the 2nd of April
The market hates uncertainty. And the current administration is so busy changing so many institutional assumptions that uncertainty has reached a fever pitch. Investors are running from stocks and building massive piles of cash.
Of course the truth is that the future is always uncertain and to think that we or anyone really knows what’s coming next is an illusion.
But one thing is certain—April 2nd is coming and President Trump has proposed tariffs with most of our trading partners. Investors are so certain that these policies will hurt the world economy that they have sold stocks in record amounts.
Oh, I forgot, the problem is uncertainty!
Strangely, when investors are worried about uncertainty, they sell perfectly good companies, certain that they know exactly what will happen next. These investors are pricing in a recession in the US and a reduction in world trade. We think both of these measures of prosperity aren’t as fragile as current stock prices suggest.
We at Dock Street fight the urge to have any strong beliefs about the future—at least in the short term. We warned at the end of last year that two plus 20% years in the stock market suggested a choppy market in 2025 at best. And a down year at worst.
As we have often warned clients (and ourselves), drawdowns are the price we pay for passively owning great businesses that, in the long run, make us rich.
Best regards,
Daniel A. Ogden
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