The stock market is often perceived as a rational machine, responding directly to fundamental economic changes. However, short-term market movements are largely driven by perception, sentiment, and expectations rather than actual economic shifts. This reality has been on full display in recent weeks as Donald Trump’s tariff threats have sent markets into a tailspin, despite no immediate changes in corporate earnings or supply chains.
Major indices have been experiencing significant volatility, with some entering correction territory. Yet, if we take a step back, it’s clear that nothing has materially changed for companies—at least not yet. The tariffs being discussed have not yet had a chance to make a material impact, and most businesses continue to operate under the same conditions as before. So why is the market reacting so strongly?
This post originally appeared at Investing Daily.