I understand why so many are appalled by the new tariffs, but I am a little bewildered by the big drop in the stock market.
Are not stock prices supposed to reflect all known information? This is a president who has already done something like this on a smaller scale in his previous term, has loudly proclaimed he would be doing this during his election campaign, has been trained to believe that ignoring the law and courts has little consequence for himself, has been appointing obvious trolls for the most part instead of anyone with a modicum of real or imagined competence, and no one is around willing to restrain him this time around. Why is anyone surprised?
This is yet another example of how the strong efficient market hypothesis is wrong, which claims that prices in a market always reflects the “true” price.1 Lots of people may have all the information they need, but that is only going to help a little with stopping them from deceiving themselves; so many people are only willing to believe what they want, regardless of what the reality may be.2
Unless one considers the strong efficient market hypothesis as defining what “true price” means and not a hypothesis, where “true price” denotes the price everyone pays in the aggregate, but this lacks any utility as a meaningful hypothesis. It also misleads the layperson that there is an objective and correct “true price” independent of any person.↩︎
Trying to prove yourself wrong to make sure you are not fooling yourself is part of the scientific method. More people need to use it.↩︎