An ultimatum from President Trump last Sunday night that tariffs will be raised should China back away from the trade deal was the big news that influenced equity market activity.  The characteristically terse communication was followed up mid-week with a tweet of “deal broken” in response to what was perceived by US negotiators as a reversal on key points. Naturally equity markets swooned as disappointment swept expectations. The Chinese of course said that there would be retaliation though details were not shared.

As any parent would attest, the use of timeout as a disciplinary measure punishes the adult as much as the child. The tantrums, the crying, the constant effort to actually instill the intended lesson makes one wonder who is learning what.  In this case, we make no assertion as to whose actions caused the row resulting in the current standoff. With information filtered through so many layers, you cannot discern what is fact and what is spin.

The reality is that in the short-term both sides will feel economic discomfort. Both hope to weather it given growth readings and recent stimulus, and both probably will. Longer term, the issues of intellectual property protection and market access need to be addressed so talks must continue and resolution must be had.

Meanwhile, US equity products saw a $20 billion outflow this week. Par for the course in an unloved bull market as traders are trigger-happy at the whiff of concern trying to be first out the door. Granted, the old adage of “Sell in May and go away” is ringing in ears. We remind investors to consider what their time horizon for investing really is. Most are looking out over decades.

Yes, US valuations are full and corrections (technically defined or not) happen every year.  Yes, historically the summer months are slow and weak hence the saying and the reduced stress of traders on beach vacations.

But just as true are the studies showing how “time out” of the markets negatively impacts long term compounding. Getting in and out requires two tough decisions that most do not get right. Take the opportunity of this quick recovery in 2019 to rebalance to your target risk where needed and stay focused on quality, but stay invested.