The world now knows what President Trump had in mind for his Liberation Day – tariffs on almost every country at a rate of at least 10%. For countries like China, the EU, and Vietnam, Trump decided to impose much heavier tariffs, which the US administration thinks is taking advantage of the United States. The Barefoot Investor has given his thoughts on the 'Trump Slump' situation.
Scott Pape has been giving Aussies financial commentary and advice through books, columns, and Q&As for many years. He speaks plainly and gives common-sense advice, which is useful because common-sense doesn't seem that common.
The S&P 500 Index (SP: .INX) fell 4.8% overnight as investors reacted to Trump's tariff announcement. The Apple share price fell 9%, the Alphabet share price declined 3.9%, the Tesla share price dropped 5.5%, the Nvidia share price sank 7.8%, the Broadcom share price fell 10.5%, and the Meta Platforms share price declined 9%. Ouch.
So, what does the Barefoot Investor think?
Don't panic
In his newsletter to subscribers, he posed the question to himself, "…is this the start of a much bigger Trump Slump that will actually see your super in freefall?"
Pape's honest answer was that he had no idea. But, he pointed out that the world has faced "much bigger threats" than what Trump (and Musk) are doing, such as "World War I, World War II, the Great Depression, the Spanish flu, the Vietnam War, the Korean War, the Holden Captiva, the Global Financial Crisis, Covid."
Despite all of those events, the Australian share market has finished higher in 101 years and down in 24 years since 1900. There weren't many times when the market saw big gains or losses.
According to the Barefoot Investor, if someone had put $1 into the Australian share market in 1900, that person would be dead by now, but that $1 would have grown to $4.2 million.
In terms of the 'Trump Slump', as the Barefoot Investor called it, Pape is not (too) worried. He said:
…understand that this downturn will not last.
Know that it never lasts.
In fact, what history does show is that the larger the downturn, the higher the future returns. Or, in other words: don't throw your babies out with the bathwater.
Two pieces of advice about the Trump Slump
The Barefoot Investor had two pieces of advice for investors.
First, don't check share prices (and delete the app). That's good advice. In my view, you'd just be asking to feel bad if you checked this week.
Second, don't listen to forecasters. When are economists ever precisely right?
Pape advocates for investors to use exchange-traded funds (ETFs). They can provide diversification and allow investors to track the market's performance over the long term.
Who knows how far stocks will drop, but now investors are being presented the opportunity to invest at a lower price during this 'Trump Slump'.
