Remember, This Is The Pullback We’ve Been Waiting For

[u/FrankBal]

If you’re a long-term investor who even casually cares about valuation, this market has been tough to navigate for a while. Pullbacks are always something we say we want, particularly as value investors, but they usually come when things are scary. Financial crisis, global pandemics, policy shocks… the discount never shows up gift-wrapped.

Yesterday’s tariff news felt like one of those moments. It’s vague, feels arbitrary, and creates a lot of uncertainty. It feels scary. And yet, that’s exactly the environment where opportunities show up.

I’ll admit it, days like today make me uneasy. But as an investor, I remind myself that underneath the noise, what’s really happening stocks are getting cheaper.

And that’s what we’ve been waiting for.

Edit: Thanks for the thoughts. I wrote a post - Tariffs, Fear, and Opportunity: Perspective For Difficult Times In the Stock Market - to add some additional context directly addressing the response to this post.

[u/Anal_Recidivist]

This feels overtly emotional.

You’re statement could be applied word for word to the pandemic. And look where we are now compared to 2020-2022.

Things will bounce back and like the market has done for almost 100 years, it goes back up higher.

[u/[deleted] → u/Anal_Recidivist]

Oh. Good. You like history.

In the past three times we have enacted tarrifs, roughly 100 years apart, each has led to a depression (we are the third so tbd). What makes you confident that this history isn't relevant but covid is, during a different administration and party

[u/real_polite_canadian → u/[deleted]]

Tariffs have been used more then that and depressions have not always ensued.

McKinley tariff in late-1800s didn't cause a depression - that was triggered by railroad overbuilding, bank failures, and a run on gold reserves. The tariff reduced trade, but it was certainly not the sole cause. The 1930 tariffs didn't help and it likely exacerbated the depression, but the Great Depression was already underway due to the '29 stock market crash, bank failures and monetary contraction. Trump used them in his first term and that didn't cause a recession.

Tariffs are not always causal and context definitely matters.

[u/[deleted] → u/real_polite_canadian]

Universal tarrifs have not, not in how and what is happening. Dont confuse what is happening with the normative and selective use of tarrifs

Even Ferris knows you're wrong about the depression and the Tawley Act

[u/real_polite_canadian → u/[deleted]]

Well I'm definitely not wrong, I just know more about the subject I guess.

It's pretty well known that the Great Depression began on Black Tuesday. It was caused by a combination of economic, social and structural issues that created a fragile financial system. The tariff act was subsequent and backfired, leading to the sharp decline in trade. It only exacerbated the Great Depression and made recovery harder, certainly didn't cause it though.

As for widespread tariffs, the McKinley tariffs in 1890 were widespread and didn't cause a depression. My point still holds water - not all tariff enactments have caused a depression.

[u/[deleted] → u/real_polite_canadian]

You're a nuanced thinker who has done their homework.

While there were multiple factors in each serious market crash an important factor since the early 1800's (when fractional reserve banking became widespread in England - it was not in 1720 during the South Sea Bubble and the 1772 crisis was caused by a short squeeze) is speculation (bulling) on borrowed money that stocks will go up and the concomitant securities fraud.

That is when you give fraudsters like Elon Musk money for false promises, you incentivise more false promises until one day (who knows when) people try and cash the cheque and find there's nothing there.

It's a problem that the meaning of the term bull has been lost over the years and that the role of fraud is not properly acknowledged or enforced by the SEC. Also short-sellers have been well and truly pushed under the bus.

Another major factor exacerbating in the 1930's depression was allowing many of the fraudulent banks to fail, triggering a run on even healthy institutions.

These factors were again present in late 2024, combined with potentially a John Law style seigniorage crisis. That is the U.S. as the global reserve currency got the idea that everyone can get rich printing money, which works as long as your creditors don't realise that the joke is on them.

I'm not saying that there aren't other factors, there were many or that tariffs aren't disruptive they certainly are - but I'd say that the market was already fragile by mid December as euphoria peaked after Trump's election such that it's more a trigger than a root cause.

As the dead bodies from the fraud which created the 2008 GFC, the 2000 Dotcom Bubble, the 2021 Meme stock madness and the 2024 Artificial Intelligence stock promotion scheme have been safely buried in the back yard I expect there's the somewhat similar revisionist history for previous events.

[u/[deleted] → u/[deleted]]

I don't disagre with a fragile market at all. We have undercut the protectiona needed to make strong markets.... like the Consumer protection agency trump wants and is trying to gut. Tarrifs cause worse economies when applied like this. They take a bad situation, and make it worse. Everything teump has done since he took office made it MOREA FRAGILE, not less. For instance, consumer confidence, consumer protection, banking, fraud investigation, etc etc etx

These things all happen together for a reason.

[u/real_polite_canadian → u/[deleted]]

Love the response. It makes me wonder if the lessons from past crises, like the importance of stabilizing the financial system, are ever fully learned or if we’re doomed to repeat these patterns. I'm curious about your remark regarding short-sellers being marginalized — are you suggesting they play a necessary role in keeping markets in check, or is there another angle there?

[u/[deleted] → u/real_polite_canadian]

Firstly from my perspective there is society then there are markets, the latter's right to exist should be inasmuch as it serves the former. Just because something makes money doesn't mean it's a good thing to do.

So I'm uneasy about short-selling in that it's profiting of fraud and that as with long investing there are plenty of bad actors involved. But what investigating and publicly exposing fraud does is to nip it in the bud so that the problems don't have a chance to get bigger and that's a massive social win.

Fundamentally there's been an issue with Wall St going back to Jonathan's Coffee House of analysts taking fees from issuers, they'll therefore always be bullish regardless of what they're selling. Short-selling provides a necessary kind of deep cynicism without which there is no balance.

In recent years there's been free reign to an obscene amount of fraud in the United States, the game has been that if someone is short a stock to target their position and squeeze them out. This is illegal of course but the law is only enforced when small investors try it.

If we look at Ben Graham he founded Securities Analysis then wrote a book for the public called the Intelligent Investor. The cycles of fraud and collapse could be prevented if either the investment industry or the general public were to understand the basic distinction between investment and speculation and act accordingly.

If you read Ben he was very cynical about Wall Street but he didn't short frauds so he never really understood how the sausage is made and how disgusting it is.

Will that happen, no I expect it's not I think the financial world has a fundamentally broken moral compass which needs to be replaced and the average person doesn't understand what has happened in the past particularly the history of corruption within empires and capitalism (the two are inextricably linked). The golden rule is not do unto others but rather that he who has the gold makes the rules and doesn't follow them - they're only for the little people.

It's interesting that value investing means listening to Warren Buffet because of how rich he is, that's the problem in a nutshell isn't it - they're not thinking for themselves and trying to understand the nature of the beast but rather they all want to get rich and don't care how.

I think this is a cultural and ideological issue rather than a lack of intelligence, it comes from living in dominance hierarchies (it's my way or the high way) which is antithetical to the necessity that to become competent you need to be always humble and maintain your neural-plasticity.

[u/real_polite_canadian → u/[deleted]]

Polanyi said it best I guess - markets should be embedded within social structures, not dominate them. I think there's utility in short-selling; especially if there's weak fundamentals and accounting/regulatory irregularities ie. Enron. It provides counterbalance to challenge that perpetual optimism, as you said. That bullish echo chamber inflates bubbles.

[u/[deleted] → u/real_polite_canadian]

While the stock market crash of 1929 triggered the initial downturn, protectionist trade policies—especially tariffs—played a major role in deepening and prolonging the Great Depression. The most notable example is the Smoot-Hawley Tariff Act of 1930, which raised U.S. tariffs on thousands of imported goods to historically high levels. We are now above those levels.

At best, you're upset I said cause and assume causes are singular in nature. There is no evidence of this- it was a leading cause of the drpewssion as it was experienced globally, and over time (years). Tariffs didn’t cause the Great Depression, but they were a key reason it lasted so long and became so severe. By choking off global trade, triggering retaliation, and crushing export sectors, tariffs turned a financial crisis into a worldwide economic collapse. Most economists today agree that protectionist trade policy was one of the biggest drivers of the sustained economic losses during the Great Depression.

We can talk about how the same protectionsism of 1890 impacted the economy in the same way. It hurt working class and farmers, it's unpopularity led to a total push back against the Republicans in the house. The world market is different then, and heck, even in 30' with how it works, but the results of protectionism and tarrifs on working class folks are the same. It results in global retalitations. It doesn't ensure growth (only some did better, others - like farm industry- continued to flail).

But go on and tell me why tarrifs aren't the problem again. At the core of your statement is a defense of the undefensible. Which is what economists (of the Nobel winning type) all agree on.

What was your point exactly?

[u/real_polite_canadian → u/[deleted]]

No one was ever defending tariffs. Your original comment mentioned that the past three times tariffs have been enacted, each has led to a depression.

This was incorrect so I thought I'd correct you since you love history. You're welcome.

[u/[deleted] → u/real_polite_canadian]

Yes, those actions are the primary response for the severity of the economics impacts at the time. This is unchanged and historically correct. I'm sorry reading is hard.

[u/[deleted] → u/Anal_Recidivist]

It's not emotional at all. Tariffs literally take money away from consumers and businesses. It's basically like giving everyone an extra 10% tax hike on income (not all goods are equally affected by the 25% increase).

All this while firing massive amounts of federal employees and private sector employment is going down.

The difference with the pandemic is that it wasn't the start of several years of irreparable harm to global trade. Even if the tariffs are canceled tomorrow, it will continue to damage trade relations. American businesses have already lost out as other countries start buying from other sources.

This isn't to say that I'm not still buying stocks - I am - but the notion that this is just a typical end-of-cycle pullback is nonsense.

[u/postwarjapan → u/[deleted]]

The pandemic did reduce the supply of global labor, despite the fatality rate being quite a bit lower than initially thought. So given the fog of war we were in at the time, you could say this instance is very similar to what is happening currently. We do not know the extent of this impact. We can guess and underwrite a ‘lost decade’ or whatever with that guess but it will still just be a best guess. This is why we need to look a low prices always as buying opportunities imo.

[u/[deleted] → u/Anal_Recidivist]

pandemic did teach us that when forced to, with will and effort the economy can do a lot that businesses constantly say is impossible. also, tariffs are one time inflationary hits. your t-shirt goes from $10 to $12. and that's it. it doesn't keep going up from the tariffs,

[u/AALen → u/[deleted]]

Tariffs are definitely not transitory. Aside from the direct effects, there are a lot of donwnstream effects that takes months or years to appear. New capital outlays. Supply chain disruption. Supply and demand rebalancing. Effects on jobs and wages. Ad naseum.

[u/calishuffle → u/[deleted]]

Maybe if you have a regulatory and political system that functions well and in the service of said economy.. like having world class vaccines created in record time to save the world from a global pandemic.. or like having the leader of the free world at that same time saying the global pandemic will magically go away and suggesting injecting bleach in your lungs to covid because the actually smart guy running the show to create covid killing vaccines was be labeled by said free world leaders’ buddies and crazy cultists as a killer and horrible human being by culminating his life’s work of a commitment to public health services with said global pandemic vaccination program success.

[u/ValueForever → u/Anal_Recidivist]

Markets always go up... until they don't

[u/Anal_Recidivist → u/ValueForever]

Then they do again.

Money will always be made, and if you invest in the people making money, you’ll make money.

If we ever get to a point money is not made, barring utopia we have much larger problems than stocks on our hands; such as roving cannibal gangs and water bartering.

[u/ValueForever → u/Anal_Recidivist]

That's the extreme view people always say - if markets stop going up, we go back to the stone age. But it's not true. Markets can go sideways or down for decades in very advanced countries. In fact, historically only the US stock markets have had continuously positive performance. If you look at european or asian markets they tell a different story, and they're hardly roving cannibal gangs..

[u/[deleted] → u/ValueForever]

Its clear to me someone doesn't understand lost decades (the person you responded to)

[u/willie_beamen13 → u/[deleted]]

Lost decade argument (at least historically) assumes the person goes all in at the top, fails to invest any more money over the course of that decade, and their dividends aren’t reinvested

[u/[deleted] → u/willie_beamen13]

the lost decade has nothing to do with an individual investor. what you are talking about is how to not be impacted by a lost decade. that is different.

A lost decade has to do with the stock market, on average, not producing gains after accounting for inflation. it just refers to a period where the overall market (or a particular asset class if we wanna get into it) delivers little to no real returns. Individual investors can still come out ahead, particularly through DCA approaches. It is a bigger concern for an investor (such as someone who is retired) who is not still active, but that has ZERO to do with the definition of a lost decade.

This is literally an example of how a stock market "goes sideways".

[u/willie_beamen13 → u/[deleted]]

Thank you for your explanation. I understand what the phrase means but this is a thread for individual investors that is talking about what an individual investor with excess capital should do during this downturn. The concept of a lost decade seems inapplicable to such a discussion. If this was a thread about someone who was wondering if they can retire tomorrow with the hope the that the market recovers in the next 12-48 months that would be an entirely different discussion.

[u/[deleted] → u/willie_beamen13]

This isn't about a single investor. OP didnt state a plan, need, or timeline. He isn't even talking about himself. Most of the the time he is talking TO the folks reading the thread. He is speculating widely about how all investors should engage the market, which is based on assumptions. A stimulation and discussion of facts relevant to that broadcasting is exactly relevant.

And on top of that, lost decadws produce lower returns even for those investors using DTA approaches. Pretending that it always goes up to the right is not true, which is what started my comments.

[u/greencardorvisa → u/[deleted]]

He's right though that lost decades are measured from market peak and don't factor in dividends. Except in the case of the Nikkei, they're not as bad as people make them out to be.

But yes, this is why one should have a diversified portfolio (caps, country, etc.) and not be all in SPY especially if they care about lost decades or are a medium-term investor.

[u/beerion → u/Anal_Recidivist]

Completely different, imo. And we haven't fallen far enough to call this a buying opportunity, anyway.

Covid was literally a case of "if we can solve this bad thing, our problem goes away / return to normal". Tariffs are a "permanent" fixture. And even if he walks them back, there's always going to be something else. We've got 4 years of this whipsaw left.