This is what a tariff-driven sell-off looks like

Appropriately diagnosing what’s happening in markets, as well as the typically arduous task of assigning causality to market moves, are crucial in allowing you to develop a framework for what might happen next. The benefits of what happens when you have a mental map that bears a close resemblance to reality are apparent today.

For weeks, other outlets were telling you that stocks were selling off because of tariff jitters and whatnot. We were focusing more squarely on the momentum unwind as the main cause of the stock market’s newfound ills. Tariffs, as long as they were just rhetoric, were mainly a sideshow, in our view, in that they just reflected the administration’s bias toward policies that are decidedly not pro-growth.

This was never a good-news story, but a bad-news one: this meant there was always more room for us to price in a more tariff-centric shock as these measures emerged. Based on the price action today, we’re doing that in one fell swoop.

A basket of stocks highlighted by Goldman Sachs ahead of the US election as being vulnerable to tariffs President Trump might impose is lagging the S&P 500 by nearly 7 percentage points today, by far its worst relative performance on record. The basket includes the likes of Dollar Tree, Five Below, Best Buy, Nike, and Target.

So it sure doesn’t seem like the market had been efficiently pricing in tariffs from February 19 through April 2. The proof is in the pudding.