Duck!

Two days ago US stock markets hit record highs. But Wednesday was the worst day in eight months. Equities fell. Bolds rallied. Volatility spiked. Gold gained. The US dollar tanked. Big markets in Toronto and New York shed a little under 2%. Balanced portfolios were down less than half of that. In terms of losing days, it was a piffle. But humans being humans, fear was in the air.

Why did stocks fall?

Not because Donald Trump is a fool who thought he could bully his way over the justice system and intimidate then fire the FBI boss, or whose campaign operatives may have encouraged Russian hackers to throw the presidential election, or even because the guy is unethical and may end up impeached. Markets don’t care about Trump. But they’re obsessed with making money – and he’s suddenly turned bad for business.

Investors feted Trumpenomics starting in November, figuring his testo-driven, pro-business agenda would goose GDP, cut taxes, boost spending and slash regulations. After four months of governing, none of that is remotely close to happening. Worse, his gaffes have weakened support in Congress and made him look like a whiny billionaire. Claiming three million illegals voted in the last election or that Obama wiretapped him is right up there with his birther blatherings and Ivanka hiring Chinese workers for $1 an hour.

This guy is going down. Deservedly, maybe. But he will not take prudent investors with him.

Yes, financial markets hate uncertainty. Just look at what has happened on the VIX, which measures volatility:

And the correlation between the Trump missteps and the market’s moves lower are unmistakeable. When FBI Director Comey was punted, eyebrows were raised – given his meritorious service in government. “Comey,” said NBC News Tuesday night, “has more credibility in Washington than the President.” Then all hell broke loose as it became clear Comey was fired for refusing a Trump directive to back off an inquiry into the dismissal of a Cabinet minister and, likely, the Russian connection.

Thus, the Donald may have obstructed justice. If true or proven, he’s history. And so we had this reaction to the news:

Should you worry? Is it time to run around in circles, break into a cold sweat, eat a bottle of Tums or just wade quietly and desperately into the sea? Could the Trumpster destroy your retirement or Hoover your house money?

Yes, of course. If you panic, act emotionally or generally invest with your pants. Here is what the Big Brains behind this pathetic blog think is happening, and what is likely to come next

• This will continue to play out over months with no quick resolution. So, like, ignore it.
• If there’s a smoking gun of collusion with Russia and it’s proven that Trump tried to impede the investigation – it’s an impeachable event. This would be very unsettling in the short-term and result in further market weakness.
• However this should not derail the economy and lead to a recession, because the US recovery continues and is strengthening.
• Markets were overdue for a pullback given the strong run since November, and the low volatility on the VIX (until this week) showed investors were not pricing in his dippiness.
• You need to remember these market sell-offs happen with on average three 5% pullbacks a year and one 10% correction a year. This is normal.
• Even with Wednesday’s sell off the technicals remain bullish with the S&P 500 in an uptrend and above its rising 200-day moving average. The market’s just 2% off its highs and is up 5.3% even after today’s decline
• Corporate profits – the mother’s milk of stock prices – were up 18% in the first quarter are expected to remain strong for the rest of year
• So we have an improving economy, robust corporate, low inflation allowing central banks to keep rates low, plus the technicals remain strong. “I’m still bullish,” says guest blogger and fancy portfolio manager Ryan Lewenza, “but continue to think 2018 could be a more challenging year. Right now, investors should chill.”

Of course, if you have all of your money in equities, Wednesday sucked. But you deserved it. The way to find zen is to have that balanced and diversification we’re always yapping about. When stocks inevitably correct, bonds go up. Meanwhile the REITs continue to churn out their distributions and the preferreds deliver tax-sweet, fat yields. Investors with a good exposure to international markets can also benefit from the good stuff happening in Europe these days, where valuations are cheap, corporate earnings strengthening and the Trump wannabees have been handed their collective ass.

Out there, somewhere, is normal. Just wait.