For virtually all professional investors, the books are now effectively closed for 2025. For some time, then, all eyes have been on how to shape a portfolio for 2026. One new, one not-really-new-but clarifying factor:
–Over the weekend, an article by economist Paul Krugman (I’m a big fan) points out that the Trump tariff agenda makes things considerably better for only an infinitesimal fraction of American workers, while making everyone else noticeably worse off. No surprise, then, that the domestic economy remains weak. Given that Congress appears unwilling to act contrary to Trump’s wishes, one’s presumption is that there’s no economic improvement in sight for 2026. That’s my guess, and not really new news, I think.
–on Friday, the FBI released a limited number of heavily redacted Jeffery Epstein documents. I’ve read, and am assuming is correct although I don’t know for sure, redaction applies to anything about Epstein’s sex-trafficking of under-age girls that relates to anyone currently in the Federal government. If so, this seems to defeat the purpose of the law.
That a federal law enforcement agency would simply refuse to obey a law passed by Congress is certainly a shock. The conclusion that any counterintelligence agent. domestic or foreign (ex the FBI, I guess), would likely draw is that the files contain blackmail material regarding prominent government figures, who are acting to prevent their release. The presumption, correct or not, will be that Trump or Supreme Court justices or other powerful figures would be implicated. This will doubtless also bring up again the question of what use may have been made of the top-secret documents hidden at Mar-a-Lago, as well as what prompted the government to look for them in the first place.
It seems to me that all of this raises the risk of creating new plant and equipment in the US. So, not good for the dollar nor for companies whose main attraction is aleady owning tangible assets in the US. Arguably, at some point, foreigners will be willing to buy brand names owned by US-based companies. My own portfolio says I think this is already the case with some out-of-favor valuish US firms. Still, I think the key to success next year will be the same as this–having costs in the US, or at least, in $US, and revenues outside. And, if there were one non-stock-market indicator to watch, I think it’s the strength or weakness of the dollar against the euro and the yen.