Uncertainty describes a situation without a straight forward description involving ambiguous and/or unknown information.
Markets don’t like uncertainty.
Markets tend to over react in the near term, as traders attempt to get ahead of any suggestion of a possible change in sentiment.
Recently, markets reacted sharply to an announcement relating to the possibility of new tariffs on steel and aluminum imports, which led to talk of a trade war. Follow up comments, by a wide range of experts and commentators, suggested that this was likely to be a work in progress and possibly no more than a negotiating tactic aimed at NAFTA discussions and China. Markets promptly calmed down.
Investors should remain focused on longer term investment strategies and steer clear of short term head fakes.
All comments and suggestions are welcome.
Walter J. Kirchberger, CFA