The ongoing market volatility is presented as a logical repricing of assets, not an emotional panic. Investors are attempting to account for fundamental, long-term changes to the global economic structure initiated by new tariff policies.
The administration's focus has pivoted from maximizing economic growth and supporting equity markets to redistributing the existing economic output. This is a stark contrast to past crises where officials would actively try to calm markets.
Policies designed to re-slice the economic pie by erecting trade barriers are likely to shrink the total size of the global economy. Consequently, the U.S. economy will also contract, making it difficult for any single group to end up with a larger absolute share.
The 40-year trend of equity investors capturing an ever-larger share of the economic pie is now under direct threat from policy. The new paradigm may involve lower corporate margins, reduced pricing power, and consequently, lower equity valuations.
Keep pulling the thread on Aswath Damodaran.