Why Stocks Are Crashing Hard

Summary

In this video, Sasha explains the uncertainty driving the current downturn in the stock market, largely due to the introduction of new tariffs on imports from Mexico, Canada, and China. The unpredictable nature of these tariffs is causing concern among businesses, especially small companies. Sasha delves into how major corporations like Apple could be affected, either by absorbing the tariff costs or raising prices, which could impact consumer demand. With tensions rising internationally, this situation could lead to significant long-term market challenges. Ultimately, Sasha underscores the importance of staying informed as this volatile situation unfolds.

Takeaways

• 😀 The stock market is currently in a downturn, and despite some signs of recovery, the situation remains uncertain and volatile.
• 😀 Finance influencers are prematurely declaring that the market has bottomed out, causing confusion and pushing people to buy stocks without fully understanding the risks.
• 😀 The U.S. has imposed significant new tariffs on Mexico, Canada, and China, including a 25% tariff on Mexico and Canada and a 20% tariff on China, which could lead to higher costs for businesses and consumers.
• 😀 The uncertainty around these tariffs makes it hard for businesses to plan effectively, as companies are unsure whether the tariffs will remain or change at any given moment.
• 😀 Large companies like Apple may be able to manage the impact of the tariffs in the short term, but smaller businesses may face severe financial difficulties due to unpredictable cost increases.
• 😀 Apple and other companies may either absorb some of the tariff costs or increase product prices to offset the expenses, but both options come with risks to demand and profit margins.
• 😀 Higher prices on goods like iPhones and MacBooks due to tariffs could reduce demand, especially as consumers may delay purchases, waiting to see if tariffs are lifted or reduced.
• 😀 The short-term effects of tariffs may not fully hit until later quarters (Q2 and Q3), which means we will only see the true impact of tariffs on business earnings in a few months.
• 😀 The U.S. government's tariff policies could also lead to retaliatory measures from other countries, potentially decreasing demand for U.S. products and services globally.
• 😀 International leaders, including those from China, France, and Canada, are unhappy with U.S. tariff policies, which could affect global economic relations and contribute to market instability.
• 😀 The stock market faces a serious risk of correction as many tech stocks are priced for perfection, and if the tariffs and global issues persist, companies may struggle to meet expectations.

Q & A

What is the main reason behind the recent downturn in the stock market?

The downturn is largely driven by uncertainty, particularly due to new tariffs introduced by the United States on Mexico, Canada, and China. This uncertainty is affecting business planning and investor confidence.

What impact could the tariffs have on consumers and businesses in the short term?

In the short term, tariffs could lead to higher product prices, especially for goods imported from affected countries. Small businesses, in particular, may struggle with unexpected costs, while larger companies like Apple might absorb some of the costs or increase prices.

How are companies like Apple responding to the tariffs?

Apple, along with other large companies, faces the challenge of dealing with a 20% tariff on imports from China. They have the option to either absorb some of the costs or increase prices, but both options could hurt demand.

Why is uncertainty such a major problem for businesses during this period?

Uncertainty prevents businesses from making sound decisions because they can't plan for potential price changes or supply chain disruptions, as the tariff situation may evolve rapidly with little warning.

How might tariffs affect the stock market in the coming months?

If tariffs remain in place, the stock market could face continued pressure, especially when the quarterly results reflect the increased costs. However, if tariffs are reduced or canceled, the uncertainty could persist, potentially keeping the market volatile.

What is the long-term impact of the investment announcements made by companies like Apple and TSMC?

In the long term, these investments, such as Apple's $500 billion commitment to the US and TSMC's $100 billion in semiconductor manufacturing, could strengthen the US economy. However, the tangible benefits will take years to materialize.

What does the term 'main character syndrome' refer to in the context of this situation?

It refers to the perception that the United States is acting as if it is superior to other nations, believing that other countries must simply accept the U.S.'s actions, particularly the tariffs, without reciprocal actions.

How are other countries reacting to the US tariffs?

Countries like China, France, and Canada are frustrated with the US's tariff actions. These countries are not only displeased with the tariffs but also with the broader attitude that the US is displaying towards international relations.

What could happen if tariffs lead to lower demand for US products abroad?

If tariffs result in lower demand for US products and services internationally, it could exacerbate the economic downturn in the US, potentially leading to a deeper stock market correction.

Why is it important to look at the stock market’s performance in the coming quarters?

The real impact of tariffs will likely be more evident in the second and third quarters of the year. Investors will need to monitor earnings reports from companies like Apple and others to assess the full effect of tariffs on their bottom lines.