The Action/Reaction Myth and Markets
The waiting is the hardest part. -Tom Petty
Newton's Third Law of Motion (1687): "For each action, there is a equal and opposite reaction."
Even if you haven't studied physics, Newton's Laws of Motion are engrained into our thinking. Like all great thinkers, Newton was able to boil down his complex ideas into relatable, simple concepts. But their simplicity can also lead to the misunderstanding and over generalization of his revolutionary ideas.
That appears to be happening now in the markets and in the way the public views economics. The President's trade policy started almost as soon as he took office, and became amplified on "Liberation Day," April 2nd. Immigration policy, which has seen a reduction in the work force for many industries, also started soon after inauguration. But for the last 8 months headline inflation numbers have been muted and economic numbers seem OK, leading many market participants and media pundits to say that the possible negative effects of trade and immigration were overstated and over-reactionary.