Market Moves Erratic Of Late

Whether its news about tariffs or the latest economic release, markets seem to be jittery with each passing headline. Students of history realize that markets are adjusting to new policies in D.C. and recalibrating from ridiculous valuations.

This week's musings is inspired by the 1983 hits song, "Every Breath You Take." Here’s some trivia about the song:

• This song was written by Sting while vacationing in the Caribbean. He was reportedly sitting at Ian Fleming's writing desk when he penned the lyrics.

• The record sold more than 8 million copies worldwide and spent weeks at Number 1 on the Billboard charts. It was ranked the top song for 1983 and won two Grammy's for "Song of the Year" and "Best Pop Performance By A Duo or Group."

• This song has gone down in history as one of the most misunderstood songs of the last 50 years. It sounds like a love song, when actually it's about a possessive stalker. In fact, Sting has opined that he was thinking about "Big Brother" and surveillance when he first thought of the lyrics.

• Diddy (known as Puff Daddy at the time) sampled parts of this song on his hit "I'll Be Missing You." Sting was unaware of the sample until after it was released. He has joked that he put his kids through college with the royalties.

• This song appears on the soundtracks of 6 different films.

"Oh, can't you see you belong to me?

How my poor heart aches with every step you take

Every move you make and every vow you break

Every smile you fake, every claim you stake, I'll be watching you

Every move you make, every step you take, I'll be watching you"

Here's what we've seen so far this week..

Every Move You Make. Like a possessive lover, investors become unhinged at every headline involving tariffs. On Wednesday, markets cheered hints at a

deal on tariffs with Canada & Mexico. Thursday morning, Canadian Prime Minister Trudeau threatened an permanent trade war. Markets opened down 1%. Then, at around 9 am, US Commerce Secretary Lutnick hinted at tariffs being removed from "most USMCA goods and services." Markets moved into positive territory. In fact, the last 6 trading sessions, the S&P 500 has either moved higher or lower by more than 1% all on whispers of tariff actions. But should markets have traded on this news at all?

It's clear the Trump Administration is using tariffs as a negotiation tactic to accomplish other goals - i.e., border control, flow of narcotics, etc. Secretary Lutnick's comments yesterday morning confirm a pullback from extremes. It's also important to note that Canada has been imposing 200% tariffs on U.S. dairy imports for some time and Mexico has imposed 50% tariffs on the same imports. So, a recalibration has been needed for some time. And, there is also some posturing on the part of politicians as videos have emerged of U.S. goods being removed from shelves in Canada - goods that were already purchased by Canadian businesses (i.e., any tariffs already paid). But, just like the impassioned stalker in the song, perspective on the part of investors is needed at this point. Markets have responded to new tariffs this year similarly to the response in 2018. Yes, we have increased volatility, but that doesn't mean there is zero money to be made in the market.

The year-over-year consumer numbers according to Redbook show a healthy consumer. Throughout rising inflation & higher interest rates the U.S. consumer has remained resilient. This week's Redbook data showed sales were higher by 6.6% on a year-over-year basis. Recessions happen when consumers pull back on spending, which is the opposite of what the Redbook data is showing. With higher tariffs on some imported goods, healthy consumers will likely shift spending choices to those goods that are domestically-produced.

Every Breath You Take. Every once in a while, it's incumbent to remind investors that financial news is just like any other news media outlet - they are compensated

by advertisers who choose to place ads on their network. How do they get advertisers, you ask? By showing metrics that prove people are watching their programming. Earlier this week, CNBC posted some articles that mentioned "market turmoil." This is what gets investors reading their articles or watching their shows. The returns of the S&P 500 Index 1 year following a "Markets In Turmoil" program on CNBC is +40%, with a 100% positive return. Investors would be wise to ignore noise that is affected by advertising dollars and spend time working on a sound financial plan and investment strategy.

It is likely that some of the recent activity in markets can be attributed to the "algos" (high frequency traders who step in when market volume is low.

On March 4th, the S&P 500 Index had traded higher for most of the day. Had that activity held, the index would have been up about 1% for the day. Alas, in stepped the algos around 2:20 CST. In 3 waves they pushed equities lower by 1.6%. This provides a false flag for real risk and volatility. Again, investors that stick to their investment strategy can avoid the noise.

Speaking of noise, large down days are quite common for equities during the year. On average, the S&P 500 Index sees 29 daily declines of 1% or more in a given year. Investors should come to expect these events as that's the price of admission for outsized returns from equities when they come. The best course of action for investors is to stay focused on their plan, avoid making investment decisions based on emotion, and ride out this particular little storm.

The number one song of 1983...

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