The level of uncertainty is rising again in the (ASX) share market amid the fallout of US tariffs. The S&P/ASX 200 Index (ASX: XJO) fell around 1% in the opening minutes of trading today.
US President Donald Trump announced that the US has reached a preliminary trade agreement with Indonesia that will include a 19% tariff on exports to the United States, according to CNBC. It was also reported that some "smaller" countries would get a tariff rate of "a little over 10%".
Other trading partners such as Japan and South Korea have recently been hit with a tariff of 25%.
The latest monthly US inflation data also suggested that tariffs may be having an impact. The US consumer price index increased 0.3% for the month of June, taking the annual inflation rate to 2.7%.
So, why am I feeling confident to invest with warning signs that there could be more volatility ahead? Let me explain…
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Stay positive
It's common for there to be something to be worried about locally or globally. The pandemic, supply chain disruptions, inflation, wars, elections, tariffs and so on have all featured in the last few years. The world is a big place where anything can happen and conditions aren't always going to be perfect.
I think it's important to remain optimistic, because we if sold every time there was a negative news headline, we'd almost never be invested.
There's no guarantee how any news event is going to play out, but historically it is eventually resolved sooner or later.
I think it pays to be optimistic, particularly when there is uncertainty and it may be futile trying to predict when that volatility will hit.
Long-term returns by ASX shares
The (ASX) share market comes with a certain level of risk. For there to be a chance of gains, there also needs to be the possibility of volatility and declines. It's normal for shares to go down as well as up, so we should be prepared for that.
Equity markets have delivered solid returns up until now, despite previous challenges including the GFC, COVID-19 and high inflation.
When I invest I think about where the business may be in five years or ten years, not just what may happen this year or even next year. Thinking with a long-term mindset can help us navigate shorter-term negative surprises.
Lower prices?
One of the best reasons to like market sell-offs is being presented with lower prices.
We don't have to sell anything during a market decline, rather we can choose to invest. Would I rather buy ASX shares when prices are higher or lower? That's why market uncertainty is so appealing to me.
As Warren Buffett, one of the world's greatest investors, once said:
To refer to a personal taste of mine, I'm going to buy hamburgers the rest of my life. When hamburgers go down in price, we sing the 'Hallelujah Chorus' in the Buffett household. When hamburgers go up in price, we weep. For most people, it's the same with everything in life they will be buying — except stocks. When stocks go down and you can get more for your money, people don't like them anymore.
That's why I'm looking at investing more in ASX shares like Tuas Ltd (ASX: TUA) and Guzman Y Gomez Ltd (ASX: GYG) and a few other names.
