top of page

"Trade Woes" or "Reversion to the Mean"?

As of 3:00pm today the US markets are down 2.5% to 3% on the news that the tariffs and global trade concerns may not be drawing to a close this week, as previously anticipated by the Trump administration. Interestingly, most Wall Street economist's believe that the trade negotiations will likely take many years to actually come to a resolution. So, why the big market sell off on news that most of Wall Street already expected would play out?

Perhaps the real reason for today’s market pullback is something altogether different. I would submit that the real issue is profit taking. Most people don’t realize how much the S&P 500 rallied from December 26 until last Friday, pushing its value near an all time high. From an investor’s perspective, anytime have we a significant rally over a short period of time, it becomes very logical to take some profits.