Catching a Falling Knife

Richard is a geese and cattle farmer up in the Hunter Valley, New South Wales.

Like most farmers, he’s very cut and dry when it’s time to let go of stock, no matter how fond he is of them.

The cattle go straight to the chopper markets. The geese get the axe.

Sounds brutal doesn’t it.

Get used to it because the rest of 2025 will be just the same.

During the week, Richard asked if the recent stock market sell-off was the correction we’ve been waiting for.

Understandably, he thinks a market correction works like his chopping block – one drop and it’s all over.

Markets fall the same way they rise – in a series of waves.

The only difference is speed.

This weeks sell-off was always going to be nasty because the market was so over priced to begin with…and bubbling with complacency.

It just needed a catalyst – tariffs.

So where to from here?

Trump’s tariffs will shortly morph into a trade war between an established power (US) and an emerging power (China).

But as mentioned in previous Moowsletters, I expect America’s debt and deficit problems will soon dwarf their tariff turmoil.

Meanwhile, Trump wants to Make America Great Again and he’s got four years to do it.

So I reckon he’ll rip the band-aid off fast hoping the pain of 2025 will be a distant memory by the next election.

Deep down I’m hoping that for us, not him.

This is my fourth major correction as a stockbroker and financial adviser – the dot.com bust (2000), the Global Financial Crisis (2007), Covid (2020), and now this one.

And experience tells me if you buy this market now just because it looks cheaper than a week ago, you’ll be catching a falling knife.

The next few months will be bloody and ugly but we’ll get through it.

We always do.

Have a great weekend!

Adam

Back paddock – If you want to go fast, go alone. If you want to go far, go together – African proverb