From the very beginning of this column, I have advocated to be always buying in the markets. At times of distress and losses, at times of celebration and gains. Maybe it’s a few percentage points of your paycheck that automatically goes into an S&P500 index ETF via your retirement account, or maybe you regularly set aside a little each pay period and try to figure out where to invest it. But it’s regular and it is in spite of the news, or the interest rate cycle, or the political moment or wars abroad or your feelings of uncertainty. Always.
And now, in this moment, I am a bit flummoxed. I don’t really know where to place the funds.
Since my last post, we’ve got not only a new (old) president. We have a new GOP-led Congress, and those two branches of government join a right-leaning revisionist Supreme Court. Taken together, at a glance this would appear to be the most uniformly conservative American government in many years. But it’s not actually conservative by any traditional measure. It’s certainly nationalist, isolationist, and pedal-to-the-metal kleptocratic (not one but two Trump cryptocurrencies? Naked cash grab!)
Already cracks are showing: a couple of President Trump’s cabinet picks may in fact not get the nod from the Senate. Elon Musk, co-lead of the new Department of Government Efficiency, appears to have summarily axed his supposed partner, Vivek Ramaswamy. And many of the newly signed Executive Orders look like nothing more than empty promises, just red meat for his base, and are very unlikely to survive scrutiny or lawsuits. Trump sees the presidency not as a job but as a performance for which he expects to be well paid. But when the dust settles, even Trump can’t simply rewrite the 14th Amendment to the Constitution to outlaw birthright citizenship. Even Trump can’t unilaterally rename the Gulf of Mexico, annex Greenland, or through sheer force of personality decide how many genders exist. He bullies and postures, it fires up his base, he sells them his dumb $TRUMPcoin, he gets richer, and all of it inflates his ego and generates fear in those who oppose him. Classic autocrat playbook.
That said, much of what I discussed in my last post remains true, and is worrisome. Inflation remains a major concern, and many of the president’s promised policy shifts would ultimately drive up prices. The same for mass deportations: if he fulfills his promises, and it looks like he’ll at least try, not only will hundreds of thousands of families be split and people forced from their homes and loved ones— who will do all those jobs? What does that mean for productivity and access to goods? Finally, tariffs are a huge question mark hanging over the economy the next few years. To date, it would seem the president is more interesting in using the threat of tariffs to get what he wants from other nations. But make no mistake, his bluff will be called. Then supply will fall against demand, and prices will rise.
So what does all this mean to the investor? Often a safe play is to just follow the money.
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| Billionaires bending the knee |
At his inauguration ceremony, Trump’s favorite billionaires were literally trotted out on display for the masses: Tesla’s and SpaceX’s Musk, Amazon’s Jeff Bezos, Meta’s (Facebook’s) Mark Zuckerberg, Google’s Sundar Pichai, Apple’s Tim Cook (only Microsoft’s Satya Nadella and Nvidia’s Jensen Huang were absent). Plus podcaster Joe Rogan, LVMH founder Bernard Arnault, UFC CEO Dana White. Each gave $1million or more to Trump’s inauguration fund— Musk put over $200 million into the election itself— which is to say they bought their way in. They were on the dais, lined up, Trump's acolytes, behind his family but in front of his cabinet picks. I am assuming that proximity to the president here equates to Oval Office access, and that’s surely intentional. We've long known that Trump is susceptible to both flattery and financial quid pro quo. So as a betting man, I’d say those particular companies have a strong chance of getting exempted from any coming tariffs; their expansion and acquisition plans will probably get a green light from the Justice Department.
What else looks good for your investment dollars right now? Based solely on what we know of Trump and his interests, I’d be looking broadly at the big banks, like JP Morgan Chase, Bank of America and Goldman Sachs. Do I need to mention Trump likes money? That he sees himself as a big shot financier and wants to hang with that crowd? Also ‘Big Oil’ such as Exxon and Chevron. Defense contractors both hardware (warplanes, tanks, missiles, ammunition, spy satellites) and software (intelligence gathering and processing, guidance systems, computer and network security).
It gets extra sticky when we start to consider how close to all-time highs much of the stock market is right now. The question everyone is asking: If companies are already so richly valued, how much upside remains? For that matter, the market is highly concentrated: currently the 10 largest US companies comprise about 37% of the entirety of the S&P 500 index. So if you’re an index investor because you like getting the automatic diversity, think for a moment— a huge portion of your seemingly low-risk investment hinges in large part on the success of just 10 businesses (5 of which were represented at the inauguration). My default play, just buying shares of the S&P 500 index and then ignoring them for a decade, is looking a little less certain. But again: I am spit-balling here. No one really knows what’s coming next.
The new administration is nothing if not transactional. This crowd loves to make deals, and they expect something in return. They’ve exhibited a strong desire for substantial deregulation, which inherently favors big companies over small as the big ones have deep pockets necessary for buyouts and global expansion. So look for big mergers, which spell increased consolidation and further concentration of markets. Forget the old big-business bent of Doing The Right Thing, or Saving the Planet, or DEI Hiring, or Narrowing the Wealth Gap. For now that’s over. As of this week we’re re-entering the era of Might Makes Right. Adjust your portfolio accordingly.
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Below are some great pieces I’ve seen recently which address these issues and more. A few are behind paywalls; apologies in advance.
