I’m finally getting around to reading the OECD Economic Outlook published last month.

The international agency projects economic growth in the US for 2025 at 1.8%, falling to 1.5% next year. The latter figure is better than I’d tacitly been anticipated, although it is barely more than half the rate of domestic growth in the final year of the Biden administration. The main causes offered for slowdown are what I would have imagined: tariffs and shrinking of the workforce, offset to some degree by continuing strength in tech sectors.

The major plus, if that’s the right word, is that the OECD doesn’t see US GDP in the minus column–an outcome I think is at least possible and worthy of some forethought about how defensive to become if the odds of a shrinking economy increase. In any event, what seems to me to be implied by the figures is that ex tech the domestic economy will be flirting with the big goose egg.

At least some of this worry vis already factored into today’s prices. If so, it’s only something to be deeply concerned about now if we begin to hear stories of tech companies shifting some of their operations to, say, Canada or Mexico. The OECD also seems to be thinking that the oil price will be weak in 2026, something I also consider as likely–and resulting from increased production from OPEC, both from the cartel feeling the globe is flirting with peak oil use and an attempt to force high-cost non-OPEC producers to the sidelines.

A consensus also seems to be forming domestically that a mild haircut (or more) should be given to estimates of GDP damage from domestic tariffs. This is partly the argument that after headline figures are announced, subsequent negotiation generates exceptions that take some of the bite out of the levies, partly that substitution will be more important than the consensus now realizes.

Combine this with apparent OECD optimism and one can come to the conclusion that the US stock market isn’t as toppy as it appears to me. Hard to know, even though Wall Street appears to want to push stocks to new heights.

The S&P is up by about 16% so far in 2025. Sounds great, until you note that EAFE, basically the world ex the US, is ahead by about 26% in dollars over the same time span, due in considerble measure to the sharp drop in the value of the dollar since the inaguration–although one should note that the currency has stopped falling over the past while.

Even if we ignore exchange rate gyrations, though, +16% is a lot. In addition, shaping a portfolio that acknowledges, and trades on, the dollar weakness may well have produced a result that’s–to pluck a figure out of the air–double that of the S&P. Hence the question in my title.

I’m of two minds.

On the one hand, as one of my early bosses used to say, “Trees never grow to the sky,” meaning, in essense, that if you’re up a lot in a short period of time, you have to either look for fresh seedlings or at least consider playing more defense, to preserve the gains you’ve already made. So I’ve found myself looking for stocks that aren’t closely correlated with the ups and downs of the domestic economy, as well as for value-ish names, whose main virtue is that they won’t go down. And, of, course, there’s the possibility that someone will bid for them.

On the other, for some reason my mind keeps coming back to Japan of the mid- to late-1980s. In my reading of the stock market there, there was a massive, years-long shift from the export-oriented manufacturers who benefitted from the weak yen of eariler years to domestic names–from property to retail–that blossomed in the strong currency era that emerged in the 1980s. I keep thinking that the US is undergoing the reverse movement, which has certainly boosted the S&P this year. The point, though, is that the endaka period lasted for well over a decade. Yes, things all ended in tears, as the domestic working population began to shrink in the early 1990s. But the new currency regime triggered a multi-year bull market. Could that happen in the US as well? Here, the shift would be from domestic names to exporters, but still…

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.

After drifiting for a long period of time, the gold price has risen by 50% in dollar terms since the inauguration, reaching $4000 per ounce today. This tops even the 31% rise, ytd, in bitcoin.

I followed gold mining companies as an analyst during the first decade of my career on Wall Street. I found the firms, large and small, to be very interesting, nuanced and secretive entities. But gold itself I rsee as a special kind of dirt that is used as a medium of exchange in places where people don’t trust the government in general and the banking system in particular. And I’ve kept an eye on the industry since.

I’m not a fan of gold as an investment, particularly outside the areas where it’s a common medium of exchange and where, in consequence, there’s an apparatus for the easy exchange of gold for goods. Nevertheless, central banks have been stockpiling gold this year as a substitute for dollars. And it appears private investors around the world are doing the same–although we haven’t (yet) seen an explosion in popularity of investment vehicles backed by caches of physical gold, as happened in the inflation of the early 1980s.

I regrd this as another, strong, sign that the world no longer considers the US to be that shining city on the hill. For us as investors, though, it seems to me that the gold rise just underlines the continuing attractiveness here of the third-world-investor strategy of finding companies that have costs in the US and revenues outside.

My overall impression is that it is.

Why do I think this?

–I decided in early 2024 to run a concentrated portfolio for myself. It’s done well. I haven’t written much about my holdings, for several reasons: I’ve wanted to have the freedom to change my mind quickly, I have little idea of individual readers’ risk tolerances, and, not least, I’m no longer a registered rep.

I have written about Robinhood (HOOD), though, when it was a $10-$15 stock. At the time I viewed it as a badly managed company. But it had a brand name, an unusually strong appeal to younger investors and a book value (basically, what shareholders might expect to get in liquidation) of around $10. This was a time when better run but more mature discount brokers were being acquired at 3x book. So, a classic value stock. In this case, the owners woke up, however, hired professional management and instead of being acquired at, say, $40, the stock is closing on $150. I’ve sold most of what I originally bought, but still have a tag end.

My point is that having a few of these colors my view of how the market is trading, much as I want to screen this out.

–the market is highly skewed, as a result mostly, I think, of administration economic policy:

—one aspect is the use of ICE to discourage foreign workers, especially of Hispanic origin, from entering the US and imprisoning and deporting those already here. Given that the domestic birth rate is maybe +0.4% of the population, this does two things: it puts a very low ceiling on the possible rate of GDP growth and (the closest I can get to a stock market silver lining) it thereby makes research on robotics that much more urgent.

—a second is tariffs on imported goods, not only in themselves but also as a replacement for taxing the incomes of the ultra-wealthy. In general, the wealthy save rather than spend, so giving them more money doesn’t spur growth that much; and regular people have less to spend, so they either stay home or trade down. All of this causes GDP to be lower than it would otherwise be

—a third is to launch a repeat of the 1970s strategy of lowering interest rates sharply as a way of reducing the payments on outstanding Treasury debt. Fear that this will trigger another bout of runaway inflation is the main reason, I think, that the USD has lost 1/7 of its value vs foreign currencies since the inauguration. This, of course, makes many imported goods that much more expensive.

How to deal with this situation:

–the best rule of thumb for investment success in this situation is to own companies that have costs in a weak currency and revenues in a strong currency. The most straightforward way to do this is to export. The worst situation is to have costs in the strong currency and revenues in the weak

–a second is to own companies that may not be in this position now but who have the flexibility to shift production into more favorable currency areas

–a third is to look for foreign-based substitutes for US-based companies

All this is already, in my judgment, a “crowded trade,” meaning everyone who has wanted to rearrange their holdings into the most favorable currency/tariff configuration has already done so. The biggest beneficiaries, in my view, have been US tech, especially software, and foreign companies in more favorable regulatory environments. China, I think, is the most important.

betting on Trump?

This is a case of taking off my hat as a human being and putting on my hat as an investor.

I think at least part of the upward move in the bet-on-US-stocks-and-bet-against-the-physical-place-USA strategy comes from the recent performance of Trump and Hegseth in front of assembled professional career armed forces leaders. This is a group of keen evaluators of others’ strengths and motivations. I don’t think it went well at all.

Still, I think we’re probably close to the end of the Trumponomics trade. The final shoe, I think, will be what ultimately happens with the Federal Reserve.