I see two problems with the term “correction”. Yes, there is a feeling in which every change in market prices is a “correction”, because with new information the previous price becomes inappropriate. But that also applies to an increase or a decrease in market prices. The term on the other hand market correction is usually used asymmetrical, for price decreases, but not the price increases.
The second problem is that market corrections are often seen as a healthy change, such as correcting an error that you made during an exam. In fact, the vast majority of the stock market reflects unfavorable developments. Only in rare cases where price falls reflect events that are good for the country, but bad for business can we say that a fall in the stock market is a sign of health. And the falls of the share price that are due to trade wars are certainly not in that category. Here Bloomberg:
Treasury Secretary Scott Bessent, a former hedge fund manager, said that he is not worried about the recent decline that trillions of dollars have swept from the stock market because the US wants to reform its economic policy.
“I have been in the investment industry for 35 years and I can tell you that corrections are healthy, they are normal,” Bessent said on NBCs Sunday Meet the press. “I’m not worried about the markets. In the long term, if we set a good tax policy, deregulation and energy security, the markets will do great. “
Market prices follow the tendency to follow approximately a random walk. This means that a decrease in the current share price also is a decrease in the future expected value of shares. The stock market looks ahead and records any expected futures profits of trade wars. If we do not see that profit that is reflected in the stock market, this is probably because they do not exist.
In 1930, President Hoover announced whether he should sign the Smoot-Hawley rate law. On a Sunday at the end of June he decided to sign the bill, despite receiving a letter signed by more than 1000 economists who oppose the rates. The next day, the US stock market suffered the largest one-day deterioration of 1930. Those waiting for a rebound in the De Scott Besserts Markts of 1930 waiting. Stock Do not retine June 1930 levels until mid -1955, a quarter of a century later.
To be clear, I do not make predictions about the market, because President Trump has the habit of advocating trade wars and then withdrawing at the last minute. Moreover, many other factors influence the stock market. I still have shares and it would not surprise me if they bounce back. Nevertheless, it is dangerous to assume that your policy is favorable in the long term, when the markets suggest the opposite.