No …and yes.
Working as an equity securities analyst at the start of my investment career, I learned quickly that there were two sure-fire tells that a person I was interviewing was essentially clueless:
–using the Dow Jones indices as a performance yardstick.
Even back in the 1970s, when I started out, they had long-since been replaced by the far more information-rich S&P offerings. The main issue with the Dow is that weightings are determined by the price of an individual share rather than the total market capitalization of the company in question. Not particularly useful in today’s world. Easy to calculate by hand, though, and better than nothing–significant attractions when these indices were introduced in the late nineteenth century.
–talking about politics as the primary mover of stock prices–one thin slice of the macroeconomic sphere, in other words, rather than the nuts and bolts of individual company operating conditions, strategy and competence.
No. Although the US abandoned the gold standard in the early 1970s and there was runaway inflation in the late decade, caused both by presidential pressure to keep money policy extra-loose to enhance reelection prospects and by OPEC flexing new-found muscles by sharply increasing crude oil prices during the period. But the oil spike was already turning into a sharp decline by the early 1980s. And Paul Volcker was beginning to attack inflation with higher interest rates–a battle that wouldn’t be decisively won for almost two decades.
On the other hand,
Yes. although President Trump is a 1968 graduate in Economics from the Wharton School, and presumably had the skills–and a front seat to observe the drama unfold–to understand the monetary disaster of the 1970s caused by having a too-loose money policy, he seems to me determined to orchestrate a repeat performance today. In addition, if press reports are to be believed, important decisions–like ICE arrests and cutting off weapon supply to Ukraine–are being made by unsupervised lower-level officials who may or may not inform their bosses beforehand.
On the other hand,
No, sort of. I was tempted to make a gambling analogy and say we’ve got to play the cards we’ve been dealt. But that isn’t right. Actually, we should do the opposite of that. We’ve got to evaluate the cards the government is dealing to us as citizens and figure out a way to construct a winning portfolio from them. The obvious move is toward companies that have costs in $US and revenues outside the US. A second is US-based multinationals, particularly tech companies, and among them software firms, which can/will doubtless be focusing expansion efforts outside the US.
There’s also the comparison between the US and China. Under Xi, as I see it, China has undergone a substantial economic collapse over the past decade or so. Sort of Mao-lite. Things have gotten so bad, however, that to remain in power Xi has been forced to reverse course and start to court entrepreneurs again, regardless of their rank in, or attitude toward, the CCP. So for China, the worst is arguably over. On the other hand, there’s no sign we’ve reached the bottom with Trump, or that there’s any will in Congress to oppose him. So for now at least, maybe China will not only continue to prosper but it will also get foreign inflows that would in another world be coming into the US.