AIER, Great Barrington – Week 7 – Volatility & Valentine’s Day

Micha Gartz

People often say that investors don’t like uncertainty, but it is fairly easy to move your money elsewhere. Store owners, manufacturers and all the industries which support them, however, find it much more difficult to hide or move their assets. We see this in various countries in North and Central Africa, where property rights are less well protected and entrepreneurship is a risky endeavour. If conflict or crime arrive in your town and you decide to leave, you are forfeiting your assets and wealth.

Digging through and analysing data we began to wonder whether rumours or leaks were influencing the stock market, with some stocks moving significantly in the day or two leading up to major announcements. Other than identifying general ‘winners’ and ‘losers’, we had our work cut out for us. In a US administration where volatility is the norm (think  high staff turnover, contradictory information, or spur-of-moment tweets) it is difficult to differentiate the effect of tariffs from the vast amounts of uncertainty and misinformation.

And business conditions may get more difficult, as Trump approaches setting a dangerous precedent by declaring the proposed border wall a ‘national emergency’ in order to secure funding. Regardless of the results from legal challenges to this, there is discussion about how this may be used to validate a state of emergency to secure funds to combat climate change. This may be used to justify further proposals such as Alexandria Ocasio-Cortez’s 70% ‘rich tax’, or prevent certain businesses from operation.

Aside from nearing the end of the tariff report, it’s been a fairly quiet week here at AIER. Valentine’s day was celebrated with the traditional food of police officers: donuts and (black) coffee. Staff lunch was followed by a few rounds of ping-pong, which, funnily enough, I seem to steadily be getting worse at. So much for ‘practice makes proficient’!