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The S&P 500 is down, the Nasdaq is down , and small caps are down. There's a lot of panic in the markets right now, and a lot of chatter surrounding Trump's tariffs—25% on Canada and Mexico, and 10% on China. This is my second video today, which I don't usually do, but I feel it’s important to talk about this setup and, more importantly, help you avoid some common mistakes that many investors make during a pullback. If this turns into a major decline, which it seems like it could, I’ll walk you through the typical mistakes that could trip you up and share my thoughts on a few stocks I’m considering buying if we do see a pullback.
Mexico & Canada Recession = US Recession?
So, as you’re probably aware, the tariffs have already been put in place. Canada retaliated with 25% tariffs, and Trump has threatened to double them to over 50% if Canada responds. It’s unclear if that will happen, but if it does, it would be a huge issue. According to S&P, the 25% tariffs could push the Mexican economy into recession, which could have a significant ripple effect. This isn’t just bad for the U.S.; it's damaging to Canada and Mexico as well since over 80% of Mexico’s exports and 75% of Canada’s exports go to the U.S. Putting tariffs on them, especially 25% or even 50%, would hurt their economies severely. And while it’s bad for our neighbors, it’s also bad for the U.S., and Trump has even suggested imposing tariffs on the EU, which would only escalate the situation.
The most worrying part is that Trump’s made it clear that he’s not overly concerned with the market’s reaction to these tariffs. This marks a shift from how he used to measure his success based on the S&P’s performance. Now, he's saying he’s not focused on market movements in relation to the tariffs, and that uncertainty is definitely creating fear and doubt in the market.
Bloomberg estimates that over $1.3 trillion worth of goods will be impacted by these tariffs, potentially reducing U.S. GDP growth by 1.2% and adding 7% to core PCE, which came in at 2.8% last Friday. Just when we started to make some progress on inflation and markets were pricing in potential rate cuts for next year, these tariffs could push core PCE higher. Auto prices and housing could see big price hikes, and homebuilders could face serious challenges with squeezed margins. A lot of bad things could follow, and this could lead to a pullback.
That said, we’re not sure if this will be a long-term trend. We’ve had pullbacks in the past—like in 2016 and 2018—that weren’t sustained, and the market quickly rebounded. I think this could be the case again unless this marks the beginning of a major bear market, which is still uncertain. The point I want to make here is that no one really knows what’s going to happen next. No one knows if the market will continue to drop, or by how much. And when uncertainty like this hits, everyone becomes an expert—suddenly, everyone on YouTube and Twitter is an economist or a tariff expert.
This kind of noise can be dangerous, and many of you might get caught up in it, feeling anxious about buying stocks or switching to a short-term focus. You might find yourself trying to time the market or picking stocks that could benefit from the tariffs, like steel companies, or trying to find ways around tariffs, like investing in companies that ship goods from Canada to avoid U.S. tariffs. But that’s all just short-term noise that will likely lead to losses. It’s one of the worst things you can do—falling into the trap of short-term trading based on economic noise.
So, the biggest mistake to avoid is trying to time the market or make decisions based on the latest economic story. The truth is, no one really knows what will cause the market to bounce back or when to buy the dip. Just look at October 2022—markets can surprise us, and trying to outguess the market can backfire. Stay focused on your long-term goals, and avoid getting swept up in all the temporary noise.
What To Do Next
This is the worst thing you could be doing right now. The best move is to buy Good Company—not just for the short term, like steel stocks benefiting from tariffs, but because stocks are great for the long term. They're going down right now for no real reason, and many of these companies are fantastic businesses that will keep doing well, regardless of the current noise. They’re being sold off because of short-term fear.
ASML Pullback
Take, for example, when ASML during a big sell-off due to the Deep Seek event on Monday. Now it's already up 13%. This is the same strategy that helped me buy Constellation Energy, which is now up over 95% since I bought it on August 5th, during a sell-off that had nothing to do with the fundamentals of nuclear energy or AI. This is the mindset you should have right now.
Stop getting caught up in tariff-related content or trying to predict economic shifts. No one knows what's going to happen next. If I were you, I’d focus on analyzing companies that are strong long-term plays and aren’t impacted by these short-term events. Companies that will thrive no matter what happens.
Constellation Software
One example is Constellation Software, a Canadian company that I believe is a great long-term pick. Most people haven’t heard of it, but it’s an outstanding business with a brilliant CEO, a solid culture, and excellent growth prospects. If it dips because of tariffs, I’d be thrilled to buy more of it. Another example is Microsoft. This company has nothing to do with tariffs, and it will be fine even if the economy slows down a bit. If Microsoft drops to my target price of $375 or below, I’d be happy to buy. It’s a strong long-term play.
Technology Stock
IT is another sector I’m focused on. Take Microsoft, for instance. I don’t care about what’s happening with Canada and Mexico; Windows OS, Cloud and Microsoft Office will always be in demand. If the stock dips, I’ll be ready to buy it and add it to my portfolio.
Conclusion
The key takeaway here is that no one knows what the market will do next, how much it will fall, or when to buy the dip. Watching economic videos won’t give you an edge in timing the market. The only real advantage you have is doing the research to find companies that will succeed regardless of short-term factors. And when those companies drop in price for reasons unrelated to their long-term fundamentals, that’s when you should be buying.
Look at past events like 2022, the Silicon Valley Bank collapse, August 5th, or even the Deep Seek sell-off. These were all major events where stocks sold off for reasons that didn’t affect their long-term growth. That’s where the best buying opportunities arise. Focus on the long term, ignore the short-term noise, and that’s how you’ll make money in the market.
Disclaimer: I want to make it clear that I am not a financial advisor, and nothing I say is intended to be a recommendation to buy or sell any financial instrument. Additionally, it's important to remember that there are no guarantees or certainties in trading or investing, and you should never invest money that you can't afford to lose.
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