What caught my eye this week.<\/em><\/p>\n A<\/span> long-time Monevator<\/em> reader asked me this week why we haven\u2019t written something in the vein of the Covid crisis Do Not Sell<\/a> <\/em>special that inspired a thousand (okay, four<\/a>) T-Shirts?<\/p>\n The quick answer is \u2013 as my co-blogger The Accumulator<\/em> said on that day in March 2020 \u2013 we don\u2019t like to get involved in day-to-day market commentary. Especially not for passive investors.<\/p>\n This isn\u2019t just because we don\u2019t think we have much insight into where the market will go next.<\/p>\n (No great humility on our part, we think almost nobody has that edge<\/a>).<\/p>\n Rather it\u2019s also because we believe it\u2019s unhelpful for most people to try to make the market timing<\/a> decisions that thinking you know better can inspire.<\/p>\n Calm tweaks to allocations<\/a> decided on a Sunday morning when the markets are closed are one thing.<\/p>\n Dumping half your stocks on Monday because a man on YouTube<\/em> is shouting: very different.<\/p>\n But there\u2019s a more difficult explanation as to why this isn\u2019t a Covid crash moment to my mind.<\/p>\n In short some of the drivers of this US sell-off are arguably more serious than a global pandemic. At least from an investing perspective, but maybe on a long-term human history view, too.<\/p>\n That\u2019s because something is happening in the US that I don\u2019t think we can dismiss as business-as-usual.<\/p>\n True, it\u2019s too soon to know what America apparently going rogue will mean for geopolitics and trade.<\/p>\n And for sure if after all the shouting we just have a bit more defence spending in Europe, some self-defeating but limited tariffs, and an even more winner-takes-all society in the US, that\u2019s hardly existential.<\/p>\n But if this does escalate into a 1930s-style<\/a> tit-for-tat global trade war then we can probably look forward to a deep recession, if not a depression.<\/p>\n And that\u2019s to say nothing of the obvious threats to stability of a truly disintegrating global order, if that came about too.<\/p>\n The nukes haven\u2019t gone anywhere.<\/p>\n So how should markets price in all this?<\/p>\n Probably much as they are is my best guess. The declines seem pretty orderly to me.<\/p>\n That might sound odd after one of the fastest circa 10% corrections in US stock market history \u2013 and against a cacophony of \u2018hold the lines!\u2019<\/em> from US commentators that mostly make things feel worse.<\/p>\n But we could expect a lot worse given the potential lasting damage to growth and cooperation that we\u2019d see from a Trump administration that truly did what it\u2019s saying it\u2019s going to do.<\/p>\n Without wanting to re-litigate every turn of the pandemic, once it was clear that most people recovered from infection and that the oldest were the most vulnerable, it was always likely to end<\/a> relatively quickly.<\/p>\n We had a ton of medical history to show that.<\/p>\n Millions might die \u2013 did die \u2013 and the upheaval could have \u2013 is having \u2013 long-term social and political consequences. But global productivity didn\u2019t have to be indefinitely impaired.<\/p>\n However that\u2019s not true of destructive nationalistic trade wars.<\/p>\n The global economy will surely become less efficient. And nationalism goes hand-in-hand with conflict.<\/p>\n I hardly need to state the worst cases from the last century to demonstrate where this could lead.<\/p>\n Of course most people shouldn\u2019t sell on this escalating drama.<\/p>\n But that\u2019s because a strategy of regularly trying to make such decisions will probably reduce your long-term returns, due to poor trading decisions.<\/p>\n It\u2019s not because hindsight won\u2019t show us that selling this particular time<\/em> and buying back in one, five, or ten years time wasn\u2019t retrospectively<\/em> the right move.<\/p>\n However if you have that kind of foresight, you probably already know about it. But nearly everyone doesn\u2019t. And nobody is even close to perfect.<\/p>\n (Spoiler alert: the shouting bloke on YouTube<\/em>\u00a0doesn\u2019t make the grade.)<\/p>\n Remember too that \u2013 as always \u2013 there\u2019s a confluence of factors behind this recent sell-off.<\/p>\n China unveiling of its supposedly el cheapo DeepSeek<\/em> AI innovation has blown the froth off the largest US tech firms. These had become such an enormous share of the market \u2013 as discussed here<\/a> and elsewhere \u2013 that even small de-ratings have huge consequences on the index level.<\/p>\n Then there\u2019s the US exceptionalism story that was at its height by the end of 2024.<\/p>\n This basically boiled down to \u2018US stocks go up the most because US stocks have gone up the most\u2019.<\/p>\n I\u2019m serious!<\/p>\n I could write a fancy treatise about capital going to where it\u2019s treated best or the European regulatory burden, the privilege of having the world\u2019s reserve currency, or the role of Silicon Valley VCs and high-skilled immigration in keeping North America on the cutting-edge.<\/p>\n But honestly, from a market perspective I think US stocks went up a lot for a very long time<\/a> and that this probably sucked in too much money in the expectation of even more.<\/p>\n Whereas now investors are slashing their US holdings by the most ever<\/a>, according to Bank of America.<\/p>\n Money is piling into a fiscally-emboldened Germany as it reportedly flees the US<\/a>.<\/p>\n Global fund managers are even \u2013 pass the smelling salts \u2013 putting more money into the UK.<\/p>\n Finally, if we take Trump and Elon Musk at their word (you do you) then the US has embarked on an enormous shrinking of the state, ultimately in an effort to reduce its vast deficit and national debt.<\/p>\n Compare that with Germany \u2013 finally taking the spending brakes<\/a> off \u2013 and you could paint everything we\u2019re seeing as yet another QE\/fiscal story. Capital leaving a retrenching US to go where money is getting easier in Germany.<\/p>\n Could the US fall to proper bear market levels? Could it be down 20-30% by next year?<\/p>\n Yes, I think that\u2019s quite possible.<\/p>\n But then again, it\u2019s always possible. No need to send me a prize if it happens.<\/p>\n It\u2019s nothing likely a certainty, however. And in some ways improbable.<\/p>\n American household and company balance sheets are in good shape. Meanwhile the US Central Bank has shown little stomach for deep drawdowns, so we could expect some kind of emergency rate-cut package to take the edge off any falls.<\/p>\n And this is not to even get into exactly what the US administration will do, versus how much is noise.<\/p>\n Trump is such a chaos agent, you could even argue his reputation has made this latest drawdown more orderly than it would be under a traditional US leader with a similar trade agenda.<\/p>\n While the enthusiasm for US tech stocks, say, got very giddy, I doubt hedge funds and other massive pools of capital went all-in on business as usual following Trump\u2019s election last November.<\/p>\n Which in turn implies such institutions wouldn\u2019t have gone overboard with leverage and the like, either.<\/p>\n It was perhaps telling that Bill Ackman<\/a> said in his recent Pershing Square<\/a> report that the fund didn\u2019t put on any of the asymmetric bets that have made it billions previously. For Ackman\u2019s taste the options and other securities Pershing Square uses to put on those trades never got cheap enough.<\/p>\n Which might tell us markets, perhaps surprisingly, weren\u2019t overly-complacent about risk in 2024 after all.<\/p>\n We\u2019re now going deep into the weeds for the tastes of most readers, though. So I\u2019ll conclude with three good articles on the recent wobble.<\/p>\n They are well worth a read if you\u2019re anxious:<\/p>\n Have a great weekend!<\/p>\n What is the UK safe withdrawal rate? \u2013 Monevator<\/a><\/p>\n How to waste money \u2013 Monevator<\/a><\/p>\n From the archive-ator: Monevator<\/em> is an investment site, whatever the weather \u2013 Monevator<\/a><\/p>\n Note: Some links are Google search results \u2013 in PC\/desktop view click through to read the article. Try privacy\/incognito mode to avoid cookies. Consider subscribing to sites you visit a lot.<\/em><\/p>\n Bank of England holds its rate at 4.5% amid trade war uncertainty \u2013 Sky<\/a><\/p>\n Record demand for gilts from retail buyers affecting prices \u2013 Proactive Investors<\/a><\/p>\n With more than 300,000 Londoners classed as too sick to work\u2026 \u2013 Standard<\/a><\/p>\n \u2026and more than a fifth of UK adults not looking for work\u2026 \u2013 BBC<\/a><\/p>\n \u2026Reeves set to unveil biggest spending cuts since austerity \u2013 Guardian<\/a><\/p>\n Flawed revision wipes \u00a32 trillion off estimates of UK household wealth \u2013 IFS<\/a><\/p>\n London closes in on New York as the top financial centre \u2013 CityAM<\/a><\/p>\n US offices still barely above half of pre-pandemic occupancy levels \u2013 Apollo<\/a><\/p>\n Number of buy-to-let companies passes 400,000 \u2013 This Is Money<\/a><\/p>\n UK and US hit new lows in World Happiness Report<\/em> \u2013 Axios<\/a><\/p>\n Brexit a key factor in worse UK medicine shortages in four years \u2013 Guardian<\/a><\/p>\n Why has the price of gold risen so much? \u2013 Econofact<\/a><\/p>\n Half a million homes in conveyancing \u2018log-jam\u2019 ahead of stamp duty hike \u2013 This Is Money<\/a><\/p>\n \u00a35,000 cashback mortgages to offset stamp duty hike \u2013 This Is Money<\/a><\/p>\n Joint-life annuity rates at 17-year high [Search result]<\/em> \u2013 FT<\/a><\/p>\n Get up to \u00a31,500 cashback when you transfer your cash and\/or investments through this link<\/a>. Terms apply \u2013\u00a0Charles Stanley<\/a><\/p>\n Rates tumble on instant-access savings accounts \u2013 Which<\/a><\/p>\n What the new rules on pension inheritance may mean for you \u2013 Guardian<\/a><\/p>\n Is it cheaper to renew move at the end of your rental contract? \u2013 Which<\/a><\/p>\n Get up to \u00a34,000 when you transfer your ISA to InvestEngine our link<\/a>. (Minimum deposit of \u00a3100, other T&Cs apply. Capital at risk) \u2013 InvestEngine<\/a><\/p>\n Can you pay less on your council tax? \u2013 Be Clever With Your Cash<\/a><\/p>\n Six ways to capitalise on the bust in luxury watch prices \u2013 Forbes<\/a><\/p>\n Be the sharpest in your hood with a Monevator<\/em> hoody \u2013 Shop<\/a><\/p>\n Four Barn conversions for sale, in pictures \u2013 Guardian<\/a><\/p>\n The madness of the \u00a3100,000 childcare tax trap [Search result]<\/em> \u2013 FT<\/a><\/p>\n Buy, borrow, die: how US billionaires avoid taxes \u2013 The Atlantic<\/a><\/p>\n The secret to happiness? Doing pretty okay, I guess \u2013 Sherwood<\/a><\/p>\n Europe\u2019s fiscal splurge could herald a decade-long bull market \u2013 Reuters<\/a><\/p>\n Navigating your finances in your 40s \u2013 Flyover Stocks<\/a><\/p>\n What\u2019s in the centre of your portfolio? \u2013 A Teachable Moment<\/a><\/p>\n How to approach liquid alternatives in your portfolio \u2013 Morningstar<\/a><\/p>\n Yet another study showing the many ways active funds fail investors \u2013 Morningstar<\/a><\/p>\n How much do Gen Z and millennials save compared to Gen X? \u2013 This Is Money<\/a><\/p>\n Ten best-value stocks to buy for the long-term \u2013 Morningstar<\/a><\/p>\n Retail investors take on hedge funds in Europe\u2019s answer to meme stock mania [Search result]<\/em> \u2013 FT<\/a><\/p>\n Buffett and Munger Unscripted<\/em><\/a>\u2026 \u2013 The Rational Walk<\/a><\/p>\n \u2026and Buffett\u2019s Early Investments<\/em><\/a> \u2013 Enterprising Investor<\/a><\/p>\n Poor Charlie\u2019s Almanack<\/em>\u00a0by Charlie Munger \u2013\u00a0\u00a30.99 on Kindle<\/a><\/p>\n How to Run Britain<\/em>\u00a0by Robert Peston and Kishan Koria \u2013\u00a0\u00a30.99 on Kindle<\/a><\/p>\n Invisible Women\u00a0<\/i>by Caroline Criado Perez \u2013\u00a0\u00a30.99 on Kindle<\/a><\/p>\n Chip War<\/em>\u00a0by Chris Miller \u2013\u00a0\u00a31.99 on Kindle<\/a><\/p>\n Carbon dioxide levels in atmosphere highest for 800,000 years \u2013 Yale<\/a><\/p>\n The fish collectors hoping to save rare species from extinction \u2013 CNN<\/a><\/p>\n Defra asks England\u2019s biggest landowners how they\u2019ll restore nature \u2013 Guardian<\/a><\/p>\n Is any nation serious about climate change? \u2013 The Conversation<\/a><\/p>\n Now forest to be created in West of England, 20m trees by 2050 \u2013 Guardian<\/a><\/p>\n The slow but steady advance of driverless vehicles \u2013 BBC<\/a><\/p>\n BYD says it can charge an electric car in five minutes\u2026 \u2013 Gizmodo<\/a><\/p>\n \u2026which could be EVs\u2019 DeepSeek moment \u2013 Axios<\/a><\/p>\n China\u2019s EV boom is bad for US tech \u2013 Crazy Stupid Tech<\/a><\/p>\n Can you fool a self-driving car? [Video]<\/em> \u2013 YouTube<\/a><\/p>\n AI has a search citation problem \u2013 Columbia Journalism Review<\/a><\/p>\n Majority of AI researchers say scaling is a dead end \u2013 Futurism<\/a><\/p>\n Dating apps are all-in on AI, whether users want it or not \u2013 Sherwood<\/a><\/p>\n Why AIs still struggle to extract data from PDFs \u2013 Ars Technica<\/a><\/p>\n 30 ways to use AI to make life better and easier \u2013 Art of Manliness<\/a><\/p>\n Whitewashing American history \u2013 Can We Still Govern<\/a><\/p>\n Doubt \u2013 The Edgy Optimist<\/a><\/p>\n The architect of Project 2025<\/em> is ready for his victory lap \u2013 Politico<\/a><\/p>\n Trump halted Agent Orange cleanup in Vietnam \u2013 ProPublica<\/a><\/p>\n Dollar devaluation and the anti-system youth \u2013 Kyla\u2019s Newsletter<\/a><\/p>\n Destroying America\u2019s brand \u2013 Paul Krugman<\/a><\/p>\n The prehistoric psychopath \u2013 Works in Progress<\/a><\/p>\n Six secrets to a long awesome life \u2013 Barking Up The Wrong Tree<\/a><\/p>\n William Bernstein: Oracle of the Apocalypse \u2013 Advisor Perspectives<\/a><\/p>\n 19.2 minutes \u2013 We\u2019re Gonna Get Those Bastards<\/a><\/p>\n The last decision by the world\u2019s leading thinker on decisions \u2013 WSJ<\/a> [h\/t Abnormal Returns]<\/em><\/p>\n How the Irish pub became one of Ireland\u2019s greatest exports \u2013 The Smithsonian<\/a><\/p>\n Labour\u2019s plans to get Britain building again might just work \u2013 The Conversation<\/a><\/p>\n The blonde advantage: fair hair completely changed my life \u2013 Guardian<\/a><\/p>\n British Rail wasn\u2019t all bad \u2013 The Conversation<\/a><\/p>\n R.I.P. quant-father Barr Rosenberg \u2013 FT Alphaville<\/a><\/p>\n \u201cWe need to distinguish what is actually dangerous from what sounds frightening.\u201d Like these links? Subscribe<\/a> to get them every Saturday. Note this article includes affiliate links, such as from Amazon<\/a> and Interactive Investor<\/a>.<\/em><\/p>\nChronic disability<\/h3>\n
No vaccination against economic illiteracy<\/h4>\n
Do not sell. Probably.<\/h4>\n
Never-ending stories<\/h3>\n
Crashing bore<\/h3>\n
Reinvigorating reading<\/h4>\n
From Monevator<\/h3>\n
News<\/h3>\n
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<\/a><\/p>\nProducts and services<\/h3>\n
Comment and opinion<\/h3>\n
Naughty corner: Active antics<\/h3>\n
Kindle book bargains<\/h3>\n
Environmental factors<\/h3>\n
EVs (the new PCs) mini-special<\/h3>\n
Robot overlord roundup<\/h3>\n
Not at the dinner table<\/h3>\n
Off our beat<\/h3>\n
And finally\u2026<\/h3>\n
\u2013 David Spiegelhater, The Art of Statistics<\/a><\/em><\/p>\n