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January 27, 2019 | The Unwinding

A best-selling Canadian author of 14 books on economic trends, real estate, the financial crisis, personal finance strategies, taxation and politics. Nationally-known speaker and lecturer on macroeconomics, the housing market and investment techniques. He is a licensed Investment Advisor with a fee-based, no-commission Toronto-based practice serving clients across Canada.

Financial markets have done well lately, proving those who sold last month may have taken losses for nothing. Looks like there’s more to come. Simple reason. Trump.

He just had a tough week. Trump pandered to Rocket Man Kim but now there’s evidence North Korea lied about blowing up its missile sites. Satellites just found a new one. So much for his high-stakes deal-making, as it looks like the president was played.

And after more than a month of mayhem, the shutdown in Washington ended in absolute failure for the White House. Trump shed credibility, the economy lost momentum and Congress didn’t cough up a single cent for that ridiculous wall. He played the bully card, gambled with hundreds of thousands of federal workers, air safety and public respect, and lost. For nothing. Then on Friday his long-time political mentor and buddy Roger Stone was indicted. One more Trump insider headed for trial, courts or turning into a rat.

The Mueller investigation has momentum, as do the Democrats who control the House of Representatives for the next two years. After less than a month, they have tasted Trump blood and seen his fallibility. The field of candidates for the 2020 presidential election will be vast, crowded and energized. Being who he is, Trump will respond by mocking them all, becoming more extreme as 2019 rolls by.

But what does this have to do with your portfolio?


Since being elected Trump has consistently used the stock market as a proxy for his presidency and its ‘accomplishments.’ For most of 2018 equities were at record highs, before the big swoon in Q4. That hurt. Mueller and the shutdown made it worse. Then China’s growth slowed – thanks to Trump’s trade war – and the Fed raised rates yet again. Stocks shed a quick 20%. The national mood turned sour.

Face it. Trump’s in a heap of trouble and is unlikely to recover, once Mueller reports. If he runs in 2020, he’ll lose, especially if a guy like Michael Bloomberg stands as an indy and splits the vote, or Mitt Romney gores the party by challenging his nomination. If Trump knows he can’t win, he probably won’t run, but either way he’ll be desperate for an economic legacy. Robust growth, record-low jobless rate, low taxes, high profits and soaring stocks.

This is one of the reasons 2019 will likely be a far different year than the last one. Look for a trade deal to be inked with China, for example. Better relations between the two biggest economies in the world could ignite markets. Plus, Trump is highly unlikely to shut down government again, despite his threats, in order to get his wall. That tactic won’t work any better the second time, so he’ll go for an emergency declaration instead. Interest rates will rise this year, but less aggressively than in 2018. Corporate profits are on track for an increase of more than 8%. The Trump-Xi deal will fuel expectations of better global growth and help push commodities higher. Look for oil to spurt.

All this is positive for portfolios. So will be the end of the Trump era itself, however that plays out. Two years after cheering him as an agent of growth, inflation and earnings, the sitting president has become the market’s pariah. Attacking the Fed was the final straw in December. Wall Street would rather have monetary policy it can count on than a president it can’t.

As stated, things have changed a lot, fast. Valuations of many assets have improved in the past month, but are still sitting lower than they were last summer. This is called ‘a sale.’ For example, if you thought Apple was a great company at $230 a share, then it’s probably better at $150. (Of course buying individual securities augments risk, while investing through diversified ETFs reduces it – but you get the point.)

Trump was fun while he lasted. It wasn’t long. Markets now see how the unwinding may take place. He was an interlude, not a trend. There’ll be no reverting to 19th Century economic policies of walls and barriers. Nationalism may be exciting and charismatic, pure nectar for those longing for times past, but in this world it’s a failed concept.

Yep. Globalists, 1. Trump, 0. So stay invested.

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January 27th, 2019

Posted In: The Greater Fool

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