a good day, but a very bad, no good year so far

Stocks are up today, apparently because President Trump says he won’t fire Fed Chair Powell (at least not now). Year to date, however, even with today’s morning rally, the S&P is down by about 8%, with NASDAQ and the US-focused Russell 2000 both 13% lower. In contrast, foreign markets, which have been flattish lately, are ahead by 9% in US dollars, ytd.

Superficially, this looks a lot like the 1980s, when Japan was king, or the 1990s, when the EU was being formed and, because of this, pan-European firms were being crested through M&A.

This time, however, the dominant story line is not that any area of the world looks especially prosperous. It’s about the self-immolation of the Trump-led US as an economic powerhouse, as well as the accompanying destruction of its brand as the land of the free and the home of the brave.

Thoughts on how to cope:

–value stocks, not growth stocks. A share in a growth stock is an interest in a well-managed, fast-expanding company, where the holder believes the market has underestimated how strong future earnings will likely be. Given that the federal government is acting in a way that seems to me likely to retard overall economic growth, this is a tougher game than usual. Better to look for stocks whose main virtues are that they’re really cheap and that there’s a chance (new management?) for things to start to look up. Their can’t-fall-off-the-floor-ness itself may be enough for them to shine.

–trading around positions. That is, trimming a position if it has made sharp near-term gains, with the intention of buying back if/when the price declines or establishing a larger than normal position, with the intention of trimming as/when the stock goes up. Normally, I think this is a bad idea, since stocks generally tend to respond to good government economic stewardship by going up. Today, though…

–checking out big recent losers. Again, a trading strategy–and really a sideshow rather than the main event. For example, I sold a bunch of NVDA late last year. I bought a little bit back a few days ago. Yes, this violates my first rule. But it’s a tiny position and the stock has lost a third of its value in the past few months. My intention is either to sell what I own if the stock goes up or to buy more if it goes significantly lower. I had had two issues with NVDA–valuation, and the loss of operating leverage as last year’s explosion in revenue made operating expenses insignificant. This latter was something I judged the market didn’t realize and wouldn’t take favorably when it finally noticed–which, I think, happened late last year.