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"Trump’s tariff tantrums have been impacting the markets for the last several days. Trump moving away from targeting specific countries like Mexico, Canada and to a lesser extent China, and moving to import tariffs on steel and aluminium on all countries, has aggravated the concerns. The European Union’s declaration that they will retaliate with counter tariffs has raised the probability of a full blown trade war. How this will pan out remains to be seen.
 
It is important to understand that President Trump, however powerful he might be, cannot manipulate the laws of economics. When higher tariffs raise the inflation in the US and the Fed responds hawkishly, the US stock market will crash. This will restrain Trump. But it will take some time. Meanwhile, the drama and the volatility in the market will continue.

Investors can utilise the current weakness in the market to switch from the mid and smallcaps, which are even now overvalued, to the fairly valued largecaps. The market is in oversold territory and a pull back is likely, but since FIIs are likely to sell into a rally, the upside is capped."

 

 

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