Detox

There’s been no shortage of volatility this week as the S&P 500 joined the Nasdaq in correction territory. That means it’s no longer just tech stocks in the danger zone, but also prominent index fixtures like Costco ($COST) and Home Depot ($HD). Far from poster children of ‘hype-driven’ AI investing, they're casualties of an escalating trade war all the same. 

Considering the muted reaction markets had to U.S. CPI data, which showed annual inflation eased to 2.8% in February, it seems like the gloomy atmosphere could persist for a while. But according to Trump and his advisors, that's actually a good thing.  

Treasury Secretary Scott Bessent said the U.S. market and economy have become hooked on government spending. ‘There’s going to be a detox period,’ he warned. 

One of the sectors already feeling the pinch are airline stocks. United Airlines ($UAL) said last month that government travel had stalled post-inauguration. Now, Delta Airlines ($DAL), American Airlines ($AAL) and Southwest Airlines ($LUV) have all slashed their Q1 forecasts. 

Trump alluded to the economy’s weakness being a necessary consequence of ‘bringing wealth back to America.’ But some would argue the government has another agenda. They need to refinance US$7t of debt in 2025 and they’d like to do that at lower interest rates. Trump can’t make Fed Chair Jerome Powell bend to his will, but an economy crying out for stimulus might just force his hand anyway. 

Then, there’s the fact that Americans might sooner face another type of detox. Alcohol prices are set to soar as Trump threatened a 200% tariff on all wine and liquor from the EU. Shares in American distiller and Jack Daniel’s maker Brown-Forman ($BF.B) rose 2% on the news (almost as if JD & cola is a direct substitute for French champagne). Still, the firm is reeling from the effects of Canada taking its products off the shelves entirely in response to Trump’s tariffs.

If you’re trying to work out whether to buy the dip or sell the rip, consider this: it’s been five years since COVID – one of history’s biggest collective detoxes from physical interaction, and also the fastest-ever stock market correction. It took just six days for Wall Street to go from all-time high to correction zone. But if you had invested in the index-tracking Vanguard S&P 500 ETF ($VOO) at the pandemic low, you’d still be up 100% on that investment now. (If you were savvy enough to buy Nvidia ($NVDA) at the time, you’d be up 1,819%.) 

We could keep playing this game, but the bigger picture is that markets don’t go one way forever. In times like this, it might make sense to scoop up high-conviction plays at cheaper valuations. Playing the long game in investing means a detox from quick fixes and impulsive decisions, focusing instead on consistent, strategic growth for the future.