Have you ever watched a lake in a thunderstorm?
Heavy rain pummels the surface. Dark clouds drop the sky closer to the water. Gusty winds crash waves ashore. Up top, on land, damage may occur. Underneath, in the deeper water, things often remain pretty much the same.
Last week’s stock market volatility was like a thunderstorm on a lake. Markets were doing well until the squall brewed up on Friday. Ben Levisohn of Barron’s described it like this:
“The fun started on Friday morning, when China announced new tariffs on $75 billion of U.S. goods and a resumption of penalties on U.S. cars. Surprisingly, the market handled it pretty well. U.S. futures markets dipped into the red, but only a bit, and the market appeared ready to shrug off the news, particularly after [Federal Reserve Chair] Powell stuck to his message: The Fed will ‘act as appropriate to sustain the expansion’…That wasn’t enough for the president…he turned his wrath on China and ‘ordered’ U.S. companies to ‘immediately start looking for an alternative to China.’ Now that’s escalation – even if it’s unclear whether the president can legally do that.”