The distinction I’m trying to make is between the tenor of a given stock market as a whole vs. the prospects for individual stocks whose home is in that stock market.

Take Germany, for example. Germany is a large, wealthy country, where investors turn out to have little interest in stocks. They prefer fixed income or property. So it’s not a place you’d go out of your way to explore, on the idea that profitable firms there will trade at high earnings multiples or that liquidity will be phenomenally good. There can be, however, considerable European investor interest in given German names. from time to time.

At the moment, as a stock market, I see the US as having two significant disadvantages to weigh against the fact that the market here has deep liquidity as well as a large selection of sectors, industries and individual names. The minuses I see:

–the Trump administration’s tariff agenda is anti-growth. The consensus seems to be (I have no strong opinion here, although I think this is directionally correct) that the economy will manage to avoid recession but will have some combination of lower than expected growth and higher than expected inflation. I’d put this another way–that Washington is putting a ceiling on growth prospects and that any surprises are more likely to be on the downside. Deportation of immigrant workers doesn’t hwlp growth, either.

–we call ourselves the land of the free and the home of the brave.

I was a soldier from 1968-72. My first duty station was as a platoon leader with the 5th Mechanized Infantry at Fort Carson, CO. Two older (28?) Vietnam veteran sergeants took me under their wing. As we got to know one another both told me that they were making the Army a career because they thought it was the only place in the US where a black man could get fair treatment. (One also gave me the tip that I should shoot a deer and freeze the meat at each new duty station, so I would have protein to eat that I couldn’t afford to buy on Army pay.) Although I have mixed feelings about what armies actually do, I felt proud to be in a place where all men would be treated the same way. So for me it was a tremendous disappointment (shock might be a better word) to learn that the Medal of Honor page for General Charles Rogers had been taken down by the administration and labelled a bogus award. Jackie Robinson’s army page apparently received the same treatment.

Although tis is an intangible, it seems to me that to the degree that the administration promotes the idea that we aspire to be an apartheid nation, the PE multiple investors are willing to pay for US stocks will contract.

China as a high-beta case in point?

When Xi became the head of the mainland Chinese government, he eliminated the “Communism with Chinese characteristics” of Deng and restored the policies of Mao. He ultimately extended his reach to Hong Kong, in violation of the 1984 handover treaty that had called for a 50-year transition period before restoration of Chinese rule.

The resulting economic collapse has been so bad that even a hardline Maoist like Xi has been forced to restore some elements of western-style capitalism.

The investment point here is not that I think the current US is going to be a reprise of the catastrophic Chinese experience. But I think it’s reasonable to guess that we’ll see more positive earnings surprises from China–especially Hong Kong–at the same time we’re at increased risk of negative ones in the US.