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  • Writer's pictureIshfaaq Peerally



Yesterday was the worst day of the year for the stock market with the S&P 500 $SPX500 losing around 3% and Apple $AAPL losing more than 5%. What the average investor does in such a situation is cry, blame other people (mostly Donald Trump) and start selling all their stocks. But what the intelligent investor does in such a situation is quite different.

Let's first understand what's happening to the market. Last week President Trump announced new tariffs on Chinese goods. Who actually pays for these tariffs? American companies which are making their products in China. For example, Apple $AAPL make their iPhones in China and are thus affected by tariffs. Tariffs, themselves, are not new as America was built on tariffs. Alexander Hamilton, one of the founding fathers of the US and the first Treasury Secretary, actually liked tariffs because they allowed the US to compete with European economic powers and also become an economic power. Are tariffs still necessary today? China has been manipulating their currency, the Yuan $USDCNH , for years because they are a net exporter. When you are an exporter, you receive a lot of foreign currencies and you want your currency to be weak in comparison to these foreign currencies. For example, Diageo $DGE.L , a British exporter, has been making a lot of money from the weakening of the British Pound $GBPUSD because of Brexit. That's why China wants their currency to be weak but this is unfair to the importers, mainly the US companies. That's one of the reasons why Donald Trump wants to impose tariffs on Chinese goods.

For the short term, the tariffs and the Chinese currency manipulation are bad things for the US stock market. But you should understand that whatever is happening to the market is mostly political and as an investor you can't do anything about it and only act on the effects. For the time being, I don't want to rush things. It is better just to wait. Apple is cheaper than it was last week but the stock price is not that attractive as it was last year. Another stock taking a big hit from this trade war in my portfolio is Skyworks Solutions $SWKS . I'm not going to buy more right now. And there are companies such as Facebook $FB and Google $GOOG which have no operations in China and are yet affected by the trade war. It is only because investors are irrational and are panicking, not knowing what will happen next and what they shall do. I have no idea what will happen next. Nobody knows what will happen next. Those analysts and other speculators making forecast about the future are wrong most of the time. They have been saying that there is a recession coming in 9 months since 2015. I'm still waiting. They only predict because it is their jobs. What I'm going to do is wait and look for opportunities. The market is volatile, therefore, I'm looking for gold miners $GDX to invest in. If you want you can buy Gold $GOLD itself or you can even invest in stocks which have been crashing lately such as United State Steel $X or Nvidia $NVDA but that's up to you. But be careful. It is not because stocks are going down this week that they will go down next week or go up next week. For me, the best thing to do is wait for better opportunities.

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