Scott and Ed dig into the rubble of the record breaking $6.6 trillion sell-off following Trump’s tariffs announcements. They break down how Trump determined the tariff rates, what the tariffs will do to company earnings and the real economy, and offer advice on how to deal with turmoil in the markets as an investor. Vote for Prof G Markets at the Webby Awards Subscribe to the Prof G Markets newsletter Order "The Algebra of Wealth," out now Subscribe to No Mercy / No Malice Follow the podcast across socials @profgpod: Instagram Threads X Reddit Follow Scott on Instagram Follow Ed on Instagram and X Learn more about your ad choices. Visit podcastchoices.com/adchoices
What caused the $6.6 trillion sell-off?
And your emotions are your enemy in the market because your emotions are rational in the sense that other people are having the exact same emotion and are doing things in unison as a herd, which creates alpha on the other side. And that is, if at 3.30 p.m. a lot of people were thinking, I just need to sell like everyone else,
those people generally don't do well because everyone's selling or everyone's buying, right? So you do nothing. Now, over the medium and long-term, I think it's a decent idea to say, okay, I wanna avoid some of this mental trauma. I wanna avoid what I believe is probably maybe a signal that the American run or the historic run might be coming to an end.
I think potentially saying, okay, after things have settled a bit, If I have some losses, maybe harvesting some losses for tax reasons, if that makes sense, or thinking about diversifying out into low-cost ETFs geographically. Should I be looking at some ETFs in Latin America and Asia and Europe?
Recognizing that over the long term, demographics and innovation and productivity take the markets up and to the right over the long term. I want low fees, but to just be in the S&P, Even if it's the SPY, you think you're diversified with an index fund? No, you're not. So I do think it might be time to think over the medium and the long term.
Should I be diversifying into other markets that might recognize more growth in the next five years, given that we look in America to be developing a reputation? for a less ideal place to invest, meaning the flows of the rivers of capital that have been one way into the US for the last 15 years are about to reverse, and we might experience that insurmountable foe of multiple contraction.
I think you think about this, you start talking to people about it, But you don't start selling everything and going to cash. When you're your age, and I think even when you're my age, you want to be diversified. You always want to be in the market. The markets could go up 1,000 or 2,000 points on Monday. They could go down another 1,000 or 2,000 points. So you just want to think.
You want to start thinking about how you make yourself more bulletproof, set yourself up for success. But you do not want to make big decisions from a position of emotion.
Yeah, I think the worst thing that you could do right now is panic sell. And I just want to make clear for everyone who's listening to your advice right now, you're not saying sell your S&P and go buy the euro stocks. You're saying hold your S&P, take what cash you have, and go diversify into other markets. And I think that makes a lot of sense.
The other thing that a lot of people are talking about right now, though, which I'd like to get your thoughts on, is buying the dip. You know, hedge funds... They sold over $40 billion in stocks on Thursday, which is the highest net sell-off from hedge funds since 2010.
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