Commenting on the approval of the Trump spending bill, House Republicans said it reinforced Ronald Reagan’s vision of the US as “that shining city upon a hill.”
Hard to know what to make of that statement, given that in the same paragraph in his farewell address, Reagan continued:
“a tall, proud city built on rocks stronger than oceans, wind-swept, God-blessed, and teeming with people of all kinds living in harmony and peace; a city with free ports that hummed with commerce and creativity. And if there had to be city walls, the walls had doors and the doors were open to anyone with the will and the heart to get here.”
This Congress has allowed the free ports to be closed. The doors of the city are no longer open to large parts of the world, with secret police actively arresting and deporting non-white immigrant residents. Medical assistance for the less well-off is being disappeared, as well.
Thinking as an investor, not simply as a human being, these are not actions that trigger PE multiple expansion and currency strength. There’s also the economically perverse (and damaging) decision to shift income tax burden away from the people least likely to spend their extra money, placing it instead on the shoulders of the people who would be most likely to consume.
It should be no surprise, then, that interest rates are rising, as investors factor in the greater risk of holding Treasuries, that the dollar is weakening as capital leaves the US, or that non-US stock markets are booming while the US is in neutral.
As a stock market investor, the obvious (to me, anyway) actions to take are:
–look for large US-listed multinationals with a preponderance of foreign sales
–find companies that are not highly correlated with domestic GDP
–think down-and-out “value” stocks, on the idea you can’t fall off the floor
–look outside the US. An EAFE index fund is good enough, I think. As I see it, Trump has inadvertently made Xi a hero and helped him out from under the incredible mess he has made of the Chinese economy. So Hong Kong is worth looking at for the first time in years.
I should mention that the majority of my wife and my money is in index funds. I’ve shifted some from the US to EAFE. I also already own a number of China-based companies, either through Hong Kong or as ADRs. I think medium-sized Japanese companies are also interesting, although I haven’t gotten farther than buying an English-language Shikiho.
A final issue: we have to consider the possibility that all of the economic damage Trump is likely to do has already been done–and its negative effects already factored into today’s prices. My guess is no.