Knowingly or not, the economic policy of the administration in Washington has been following the path of post-WWII Japan, which has been adopted by most successful emerging economies since then. The general idea is to encourage export-oriented manufacturing, while suppressing local consumption through tariffs and currency weakness. ICE violence and the fact that this growth recipe is being applied to a technologically advanced economy rather than a developing one are the main novelties that I can see.

In a situation like this, the right equity investment strategy is equally clear: own companies with domestic costs and foreign revenues. Tech companies are a prime example. The worst place to be is the opposite situation–foreign firms selling into the domestic economy, or domestic firms using foreign-sourced inputs. Over the past year, this strategy has been almost cartoonishly successful, producing something like double the index return. The prime sectors to be in have been IT-related.

The past short while has brought a reversal of this trend, however. I see several possible causes:

–the valuation difference between leaders and laggards has become so great that the latter have become more attractive to investors than the former. So what we are seeing is a normal rebalancing

–professionals have already exceeded their yearly performance goals by so much that they’ve decided to safeguard their outperformance by shifting to a more index-like positioning. They won’t gain outperformance by doing so, but, more importantly, they won’t lose what they’ve already achieved

–the market is beginning to act on the belief that current administration policies won’t have a long shelf life

–the rotation through AI beneficiaries–from software creators to specialized chip makers, to installation builders and to component and power suppliers–has run its course. So investors are unclear where to go from here.

I don’t have a really strong conviction about which of these, if any, is the most important. My overall sense is that in the US these days the stock market is more focused on rapid reaction to news than about anticipation. So it itself is not the key leading indicator it once was. if I had to guess, I’d go with the first of these, rebalancing, as the main driver. As far as my own portfolio goes, I’m trying to find non-tech names that are able to keep their heads above water in the current anti-growth domestic environment.