The S&P 500 is up by about 14%, year to date. NASDAQ, chock full of AI-related stocks, is ahead by 18%. The dollar, however, is down by around 12% vs. the euro, which I’m taking as an admittedly simple-minded proxy for foreign currency in general. To the eyes of a foreigner, then, US stocks have been a ho-hum affair, save for US-based AI-related stocks. If we take the Russell 2000, consisting of mostly domestic-oriented stocks, as our benchmark, its 10% ytd gain in $US means a foreigner has most likely lost money ytd from what has turned out to be a misplaced desire to own a piece of America.

It seems to me that the major set of issues we as investors have to contend with in constructing a portfolio with an eye toward 2026 are the government policies that a majority of Americans voted in favor of last year. There’s also the question of their implementation by individuals who don’t seem to have much relevant experience but who are presumably doing their best to learn the ropes while on the job. …kind of like The Apprentice, but on a much larger stage …and the issue that questions about President Trump’s apparent cognitive decline abound.

Nothing really earthshakingly new, but as I see it, the main presidential economic influences are:

–using Immigration and Customs Enforcement agents to shrink the size of the domestic workforce by arresting and deporting immigrant workers, mostly, apparently, of Hispanic heritage

–employing the armed forces in American cities to suppress protest against administration policies

–taxing imports, in an attempt to substitute tariffs for income taxes

–dismantling the Federal government health care appratus

–refocusing the domestic education system away from intellectual achievement by reducing Federal aid to schools and removing research grants to perceived liberal-leaning universities

–aiming to end the independence of the Federal Reserve and restoring control of monetary affairs to the president.

Apparently, no checks or balances here, either. Not a peep from Congress.

My take:

–workforce/education. GDP growth comes from either having more people working or having them work more productively. Productivity comes either from education or better tools (investment in plant and equipment). The domestic working population is growing by about 0.5% yearly. Presumably, deemphasiszing education will gradually dumb down the workforce, implying, to me anyway, that 0.5% is an upper bound. Any further growth has to come either from immigration or from investment in plant an equipment.

ICE raids targeting places immigrants typically work can’t be good for getting foreigners to work here, or even to come here on vacation. And the recent ICE attack on Korean workers, who were taken away in chains from the auto plant they were building in Georgia, can’t be a plus for foreign investment.

We’re already beginning to see a brain drain from the staffs of US universities as Washington removes research grants as part of its attack on “woke” culture.

Projections seem to be for US real GDP to grow at 1.5% this year, down about a percentage point from 2024. The OECD is suggesting something like the same for next year, which would be slightly ahead of what it expects from Europe.

–all of this seems to argue for a continuation of the strategy that has worked well so far in 2025, that is:

—-looking for companies with costs in $US and revenues elsewhere–and avoiding the opposite

—-also, companies whose products replace labor with machines

—-thinking discounters rather than high end

—-Chinese competitors of US and European firms.

The main near-term issue that I see is that these groups have by and large done extremely well in 2025, so I’m finding I’m also looking for value names as a way to temporarily play defense.