Today, financial market news is focused on the imposition of Trump’s tariffs on Canada, Mexico and China. This announcement, we are being told, is responsible for the widespread weakness in global equity markets, with Bloomberg carrying the story that Goldman Sachs strategists are suggesting that there is a risk of a 5% correction in US stocks, whilst RBC Capital Markets has estimated a 5-10% correction.

While the markets are clearly weak, the certainty with which commentators attribute the reason for the weakness is something that troubles me. The news about these tariffs is not new. Donald Trump talked about his tariff agenda during his presidential campaign and has done so on many occasions since he won in November. The S&P 500 has risen so far this year, with the full knowledge that these tariffs were coming. But apparently, on the day they are announced, we are, in effect, being told that markets must have thought Trump was bluffing.

I don’t buy this at all. This is old news, and although I don't believe in the efficient market hypothesis, no one can be surprised by this announcement, and I contend that it has been discounted. The only new news is Mexico, China, and Canada’s responses to the tariff imposition, which, again, is hardly a surprise, I would argue.

Markets are weak today because there are more sellers than buyers, but to attribute this movement to a single factor that everyone already knew about is, in my opinion, a mistake. Markets are noisy. They go up and down on a daily basis for reasons that are impenetrable and unknowable. The problem is then compounded because the market movement itself is then seen as being in some way informative. Investors are, in effect, led to believe “the market” has some magical insight or information which has been cleverly interpreted by those wiser than us (the media, investment banks, etc). This is a modern equivalent of witchcraft. The truth is that markets tell us about prices and nothing else. It is the real events that unfold on a daily basis around the world to societies, economies and businesses that inform us about how we should behave as investors. It is the job of investment professionals, through diligent analysis, to try to interpret, quantify and anticipate these events.

The lesson here is to beware of financial market consensus views. Too often, they assign erroneous significance to the randomness of daily financial market asset prices and attribute causation to that randomness, which may be convenient but is often wrong.