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Roula Khalaf, the FT editor, chooses her favorite stories in this weekly newsletter.

Good morning. The market had a brief revival, enraged yesterday, when the titles were circulating, saying President Donald Trump was considering a 90-day pause on newly announced tariffs. The White House did not declare that no such pause was in the game, and the market fell again. People truly Want to believe that these fees will not happen. We don’t know what to believe, so send suggestions: robert.armstrong@ft.com and aiden.reiter@ft.com.

Is the free risk now?

S&P 500 has dropped 18 percent from its peak in February. That’s not that bad.

Remember the bear market in the fourth quarter of 2018? No? Much will not. Nor has a name. But the market was reduced 20 percent. Meanwhile, the decline of 2022 (inflation panic), 2020 (Covid-19) and 2008 (major financial crisis) weighed 25 percent, 33 percent and 57 percent respectively, respectively.

But the speed of decline is worrying, and instability in the markets suggests that the tariff crisis may not have ended yet. For investors who are rational and lucky enough to sit in money or short-term bonds-Warren Buffett is the most prominent example-the further decline will have them to think of buying, not selling. We are in a real mess, but the markets overlap with the mess every time.

So now it’s a good time to think about whether the risk markets are priced to provide strong long -term returns. There are many ways to see this, none of them is completely satisfying, but everyone has something to say.

Start with the most basic assessment metric all, price/profit ratio. Here is the front in the S&P 500, with the current level shown by the red line.

We have returned to the pre-national level of the EP report, which is still relatively high when compared to the last two decades. To read this table, you may want to have some sort of theory as to why the ratings were high post-maiden (except 2022, when the inflation was thrown). Unfedged’s favorite theory is that fiscal policy was extremely loose during most of the period, pushing money into markets. If you believe the fiscal coercion is coming (as some have promised in the Trump administration), then the shares do not look free here based on the PE. They may even be priced to give below average long -term returns.

Important, when you think about the EP evaluation, think of “e”. Specifically, is the possible damage to corporate profits from the highest tariffs to the perspective of profits? It seems that they do not have, at least on the basis of “top -up” – that is, receiving assessments of individual profits for each company in S&P, weighing them and adding them. Below, from the excellent penetration of factset profits, is an estimate of the S&P 500 profits for 2025. It has dropped only 7 percent since September, and hardly from “ERITION Liberation”. So if you think the tariffs will be high and permanent, ratings probably have room to get off here, it means that the PE ratio is artificially low now. The 2026 rating has dropped even less. Again: not free.

A slightly sophisticated version of the EP report is the yield of cyclically arranged profits (“Capi” yield), as calculated by Robert Shiller of Yale. This reversed the PE ratio (making it E/P), uses average 10-year profits as “E”, and deducts the 10-year treasure yield from the result, to adjust the impact of interest rates. A softened measure is how additional yield you take from the shares, compared to the treasures. So in the table below, the highest means cheaper. As you can see, the excess yield from the possession of the S&P 500 has increased by almost a full percentage point recently, but still does not look especially juicy yet.

One way of thinking about the estimate is with the rate of capital deduction: the rate of return that matches the current shares prices with their expected money flows. Michel Lerner and HOLT team at UBS argue that high tariffs should bring the level of deduction (and stock prices). He writes:

Trade liberalization after the creation of the World Trade Organization in 1995 has probably been useful in reducing inflation down (according to the European Central Bank, more competition, lower costs of production …), on the other hand, allowing interest rates to fall more than ever and reflect the markets of net capital in the process.

To this end, for the best part of 150 years, the US deduction rate was between 5 and 8 percent. From 1995 onwards, excluding the global financial crisis, it never exceeded 5 percent. It is also evident that in a more traded wind before-1945, the US deduction rate was prominent whenever the SH.BA struck large fees for imports. . . (1890 McKinley fees, 1922 Fordney-McCumber fees, 1930 smoot-hawley fees).

Below is a discount rate table until April 1. The deduction rate has increased from 3.1 percent to 3.6 percent since then, but Lerner says that “we are not at levels in accordance with a new normal recession or a recession”.

Evelity with 1 percent of the point in the discount rate translates to about 20 percent movement into shares, so a return part of the road to the average pre-1995 would hurt a lot. Once again: shares are not price for long -term high returns yet.

If all this hits you as a little abstract, just check out the prices of large technology shares that have driven, and still drive, movements in S&P 500. Here is a table five of them (excluding Nvidia and Tesla, whose wild prices make the graph more difficult to read). What you see is that the prices of these shares-though they get the worst of the sale of tariffs-have given up only one year or more profits. All that has happened is that an extreme gathering of recent times has been overturned:

It is quite clear. The shares are not shopping. But Trump’s tariffs may not be done with us yet, and if they are not, now is the time to think about what the shopping level could be. The best thing written at this point is the absolute Banger of Jeremy Grantham of an GMO investment letter, “Reinvestment when he was terrified”, which he immediately wrote in the 2009 low market. Grantham wrote:

While this crisis roofs, previously reasonable people will begin to predict the end of the world, armed with much terrible and accurate data that will serve to strengthen the wisdom of your care (in keeping cash). . . There is only one cure for terminal paralysis: you absolutely have to have a battle plan for reinvestment and adhere to it. . . Have a schedule for the further contingent (purchase) in the fall of the next market. . .Remember that you will never catch the low. . .Searching for optimism is a loop and fraud; It will simply serve to increase your paralysis.

Words to remember, should things be worsened. More about this in the following days.

A good reading

Stark house.

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