An unexpected news event caused the stock market to plunge over the past week, with the Dow Jones Industrials losing several hundred points. Stocks had been crawling back up toward new highs last month in low volatility trading…until suddenly, a black swan arrived.

According to Investopedia, “A black swan is an event or occurrence that deviates beyond what is normally expected of a situation and is extremely difficult to predict.”

In the current era, a black swan can arrive by way of a simple tweet.

President Donald Trump took to Twitter to announce his administration would impose new tariffs on $200 billion in Chinese goods as soon as Friday while threatening an additional 25% levy on Chinese exports “shortly.”

“Trump’s tweets initially sent the market reeling,” reported CNBC. Added Bank of America, “The latest escalation of the trade war was completely unexpected... Fasten your seatbelt.”

And then, just yesterday, China retaliated with some new tariffs of its own on U.S. agricultural exports – sending the stock market down again.

In the big picture, the current stock market selloff may not amount to much. It doesn’t appear to be on par with other infamous black swan events such as the 1987 stock market crash. Then again, the current selling could just be the start of a brutal bear market that makes the 2008 financial crisis look mild by comparison.

Markets are inherently unpredictable. They can trend calmly, lull investors into complacency, then turn on a dime and become unstable for reasons nobody could have anticipated.

By their nature, black swan events are difficult to prepare for. They can come in the form of natural disasters – or technological, political, or financial disasters.

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