Elliott Wave Investor: It’s Been a Wild Week!

Stocks kicked off the week taking a dive, thanks to the latest tariff tantrum. Investors generally expected President Trump to increase tariffs and fulfill his campaign promise. However, the overnight declaration of universal tariffs against America’s neighbors was surprising.

Fortunately, those tariffs are on pause while agreements are reached. It’s possible that further tariff news will come out in the years ahead. Investors should approach the market with some caution going forward.

Notably, Trump’s tariff announcement came over the weekend. Markets were closed globally, and liquidity was light. As a result, the most liquid markets available were the cryptocurrency markets, which traded 24/7. Those markets bore the brunt of the news while waiting for further details.

So far, the market reaction looks similar to the 2018 period, during Trump’s last trade war and tariff threats. As long as the actual implementation of new tariffs is gradual rather than sudden, however, markets may be able to bear tariffs for longer than expected.

Given the new reality of uncertainty, traders may want to rethink their positions. That includes trades held overnight or longer, especially leveraged positions.

And when markets do drop on the news of a new tariff, the actual impact on markets appears short-lived for now. That may not always be the case, but traders who make contrarian buys during fearful panics may see some good short-term profit opportunities.

To look in more detail on the market’s volatility this week, click here.