The bull market narrative has taken a dark turn, but has anything really changed?

It’s doesn’t take a rocket scientist to see what’s going on in the markets these days. Everybody’s worried, it seems, that the stories that used to keep on driving indexes to new records might be coming to an end.

Consider the FANG stocks, those darlings of the tech world that just kept on giving to investors. Until mid-March, that is. Now they’re taking a hit, led downward by Facebook, which was caught napping on a user-data scandal that just won’t go away. Meanwhile, U.S. President Donald Trump has taken to Twitter to attack Amazon, which of course is completely unrelated to Amazon CEO Jeff Bezos owning the not-exactly-Trump-loving Washington Post newspaper.

The result is that Facebook is down more than 15 per cent from mid-March. Amazon was down more than 10 per cent as of Monday’s close. And for reasons that may or may not have to do mostly with the fact that they complete the FANG quartet, Netflix and Alphabet (Google, to most of us) have also taken 10-per-cent-plus hits.

So that’s one story looking like it might be in a dark new chapter. Another might be the tale of revived global growth, which finally had started to play out after developed economies spent nearly a decade “recovering” on central banks’ easy-money life support. The International Monetary Fund revised up its 2018 global growth forecast to 3.9 per cent in January — up 20 basis points from last year — and monetary policymakers had started to take steps towards normalization. Bond yields were rising, corporate earnings were strong, and equities were doing just fine.

But now, like Jason stalking randy teenagers in those Halloween movies, the horrific visage of a trade war is threatening to kill the buzz. First Trump slaps tariffs on imported steel a couple weeks ago, and China responds with its own levies on U.S. goods, and now the U.S. is poised to introduce tariffs on maybe another US$50 billion of Chinese imports, in response to which China is expected to bring in more tariffs against U.S. goods. Broad indexes have taken the brunt of the fear trade: the Dow Jones industrial average plunged nearly three per cent at one point Monday, after China announced its US$3 billion in levies.

Chaste Canada might not be immune from the trade-war bloodshed. Even though the U.S. exempted Canada and Mexico from the steel tariffs, that’s contingent on a successful completion of NAFTA renegotiations, which Trump (via Twitter, of course) now seems to want to link to (also completely unrelated) immigration issues with Mexico. So investors in the S&P/TSX composite have been feeling more pain — like they needed it.

So, uh, that’s the bad news. There seems to be a lot of it. But is it news, really, or something else? And while it’s unassailably true that the markets are always right, a contrarian (certainly not me) or an opportunist (not me either) might ask whether they might have been going a little too far in their rightness lately.

The tech selloff looks like a case of running away from smoke instead of fire. As I’ve written before, Facebook’s scandal is hardly evidence of a failing in the company’s business model. And while it might be that some new regulation is going to come of all this, is it likely to be so onerous as to justify a 15-per-cent haircut on Facebook stock?

As for Amazon, I can’t see any clear path for Trump to do anything about whatever it is he’s complaining about. (Apparently, he believes that having America’s largest e-commerce platform as its biggest customer is somehow costing the U.S. Postal Service, along with American taxpayers, a fortune.) A tax on the Internet (which Treasury Secretary Steve Mnuchin says the administration is considering) would be politically unsalable; the Postal Service isn’t taxpayer-funded, and if it raised rates for Amazon, Amazon could get stuff delivered by somebody else.

A contrarian might be less contrary about global trade fears, given the bombast coming out of Washington and Beijing. But for now, there just isn’t really much in the way of substance. Those steel tariffs that China retaliated against don’t apply to the biggest exporter to the U.S. (that’s us), and Chinese steel, which already faced punitive levies, comprised a very small piece of the U.S. imports. The US$3 billion in retaliatory Chinese tariffs represent about two per cent of U.S. exports to the country last year. And while Trump’s threatened tariffs on US$50 billion in Chinese goods would be a bigger deal, the target level still amounts to less than 10 per cent of the value of goods China shipped to the States last year.

Of course, this could all escalate into an all-out trade war, and that would be bad. But we should remember the Trump administration’s history of talking loudly and carrying a small stick on trade — at least so far. He promised to tear up NAFTA during his campaign; instead, he punted it to process. Given the current U.S. penchant for doling out confrontation and compromise at the same time, we shouldn’t be surprised if the U.S.-China “trade war” takes a conciliatory turn.

Has the world really changed that much in a month, or will this correction eventually turn around like the five other ones (on the S&P 500) that have failed to stop this bull market?

A contrarian might wonder that — or an opportunist.