I’m a big fan of Heather Cox Richardson, an historian turned political activist who teaches at Boston College, where I was a student back in the Stone Age).
Over the weekend, she wrote about the recent disappearance of a number of standard Federal reports on the state of the domestic economy:
–I think it’s pretty widely known that the head of the Bureau of Labor Statistics was fired after releasing a routine employment report that documented the recent significant slowdown in new hiring. I hadn’t realized, though, that a larger report on overall consumer spending which was supposed to be released last Friday, wasn’t. And an Agriculture Department report on food security, published annually for the past thirty years or so, has disappeared as well.
—Food banks are being hit by two opposing forces–immigrants are staying away for fear of being seized by ICE operatives, but there’s an overall increase in visits despite this.
I presume the tacit message in these erasures must be that the administration policies are doing what one would reasonably have predicted would happen–the American economy is slowing down by a significant amount and the cost of living is going up at the same time. More than that, they are making the many average Americans who voted the current administration in office on the promise of MAGA less well off.
For us as stock market investors rather than as citizens or as human beings, the main effect of the administration’s reduction in information flow is, I think, to slow down the activity of trading bots. Odd as it may sound, this is a good thing for you and me.
My brain tells me (a phrase I borrowed from one of my kids) that economic growth comes from having more workers and/or having workers be more productive. “Productive” comes down to making more profit per unit of work or unit of output. So if the government reduces the number of workers by arresting or intimidating them, overall national profit shrinks and the economy is less well off. If tariffs cause imported raw materials to become more expensive, unit profits decline if domestic companies can’t fully pass on costs. Or if foreigners retaliate by, say, not buying US-made stuff, overall domestic profits go down as well. And if you restrict the teaching of science in school, future workers arguably become less productive in high-profit industries–creating a trend of lower unit profits.
To some degree, the fall in the dollar by close to 15% since the inauguration may counteract some of this bad stuff, even though it does make the whole country a lot poorer in a global context.
Anyway, we know this and the bots arguably don’t–or at least haven’t yet made all-out bets this way. So we can shape portfolios that hold companies who have foreign currency revenues and dollar costs. Or we could figure that we’re kind of like Japan circa 1995, and that companies will be forced to develop robots to substitute for workers, or to shift sales efforts to areas with better growth prospects.
For the moment, though, it seems that the bet on weak dollar/weak domestic economy still has significant runway.