It’s been 2.5 weeks since Donald Trump took over as president of the US. As a lot can happen between the time I am writing this and when it is published, I am time stamping this at Thursday, 6 February at 09:45. In that short amount of time, he has threatened to take over Greenland, the Panama Canal, Canada and Gaza. He has also threatened tariffs on Mexico and Canada…whom he negotiated a free trade deal in his first administration, China and the EU. He has also signed loads of executive orders ranging from ending birthright citizenship to opening dams in northern California to provide water to LA (there is a mountain range in between and no way for the water to get over it 🤷♂️) and banning transgender athletes competing in women’s sports. Meanwhile, he is closing USAID, the department of education is next as well as sending out offers of redundancy to thousands of civil servants including the CIA.
It is a shock and awe tactic and it has a lot of people worried. The press can’t keep up with his announcements and struggle to keep up. His administration are doing this on purpose. He is not going to make Canada the 51st State, he says it because it creates headlines and causes a distraction. He isn’t going to take over Greenland or Gaza either. Trump is incredibly tight and won’t spend money on a place he considers to be a hell hole.
As investors in US companies, we have to keep our eye on the prize…the US markets. When Trump was threatening to impose tariffs on Canada and Mexico, the US markets hardly reacted. They have seen this before. And sure enough, the tariffs were postponed in exchange for pretty simple promises that were already in place. But it is a tick in the win column for the Don!
If however, he did go ahead with the tariffs and the markets reacted badly, it wouldn’t have taken long for a deal to be struck to get markets back on track. We have been here before, we know what he is like. He judges his success on the price of the Dow Jones. If markets aren’t doing well, he will do whatever he can to fix things so he can boast of his success.
It is also clear that this administration is going to be about making the wealthy even wealthier. This is at odds to the promises that he made to his voters. As investors in the US market, that is not our concern.
What is our concern are things like the Federal Reserve maintaining their independence. Trump clearly favours lower interest rates (he is a property developer after all) but his policies are inflationary. While central banks around the world are all planning on reducing rates, the Federal Reserve is not as it waits to hear the latest policy announcements and how it will impact on inflation. If Trump gets his cronies into the Federal Reserve and it loses its independence, it may have a real impact on US and global markets.
Trump brings chaos with him. It is how he has always lived. But a lot of it is meaningless bluster by a man who wants to discombobulate his critics and opponents. It will cause volatility in the markets but volatility is a part of investing. We have had two years of great returns and little volatility and we have gotten comfortable with that. In the long run, markets will still go up. There is no need to panic and move into cash, missing out on growth opportunities. We never know when they will happen, so it is best to stay invested so we can benefit from them.
You can be as outraged as you want about his latest tweet but you need to separate that from the investor. Keep asking yourself if people are still buying Apple and Microsoft products and getting their packages delivered by Amazon. That is where your money is and will determine if it grows in value.
Steven Barrett
10 February 2025