RPT-BREAKINGVIEWS-Wall Street homilies are no match for trade chaos

By Sebastian Pellejero

NEW YORK, April 14 (Reuters Breakingviews) - The market wreckage strewn by President Donald Trump’s trade war is uniquely driven by minute-by-minute policy whims. A trader riding out the tempest might look to the simple aphorisms passed down as time-tested investment wisdom for guidance. With trillions of dollars resting on as little as social-media posts, that would be a mistake.

Take “buy the rumor, sell the news.” Investors say markets price expectations gradually, benefitting those who get in early before highly anticipated events - and out before their full consequences are clear. But when assets are lurching based on policy positions in constant flux, what constitutes an actionable rumor? A single erroneous headline about the Trump administration considering a 90-day pause on tariffs added and erased $2 trillion in market value within just 30 minutes. Two days later, after declaring “A GREAT TIME TO BUY,” Trump unveiled an actual pause, leading the S&P 500 Index .SPX to its eighth-best day in history.

Even the distinction between news and rumor is muddled: each climb-down or ratcheting up of trade pressure is read as a signal of more to come. A befuddled trader might simply comfort themselves that “the trend is your friend” - that you should go with the flow. But which trend? Moment-to-moment price moves are hostage to policy fortune. Longer-term forces as fundamental as globalization could be receding.

Consider sneaker maker Nike NKE.N. Its shares fell 14% on April 3, but climbed 3% the next day amid hints of incipient trade negotiations. Any relief, though, ignores that the company’s future rests on the extent of deglobalization. Half of its footwear is made in Vietnam, with the rest split between Indonesia and China, which now faces levies of 145%. Nike’s stock is again declining, down 5% since.

That dip challenges the usual refrain that “a rising tide lifts all boats.” Analysts point to tariff pullbacks as a potential panacea. But negotiations are creating a bizarre patchwork of carve-outs and exemptions across product categories ranging from books to wood panels, threatening uneven long-run consequences.

When the USMCA replaced the North American Free Trade Agreement in 2020, chicken supplier Tyson Foods’ TSN.N shares gained on excitement over provisions opening Canada’s market to U.S. poultry. Yet the stock is up just 13% against the S&P 500’s 114% gain, amid increased competition and bird flu outbreaks.

At least one adage worth heeding comes from Benjamin Franklin: “An investment in knowledge pays the best interest.” Thoughtful analysis can uncover some real beneficiaries of the deeper forces underneath the headlines. Flimsy maxims will simply break on the political wave.

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CONTEXT NEWS

U.S. stock markets have endured volatile trading since President Donald Trump announced tariffs against key trading partners. The S&P 500 Index is down 5% since April 2, sitting 13% below its all-time high reached in February. Meanwhile, the tech-heavy Nasdaq Composite has dropped 4% in the same period, falling 16% from its peak.