Over the course of 40+ years of saving and investing for retirement, I’ve experienced many market downdrafts, and I never panicked. I ignored periods of volatility, kept on contributing to IRAs and 401(k) plans and watched my balances—when I occasionally looked at them—recover their upward momentum over time. This time is different.
I didn’t panic or go nuts, but I did trim my equity exposure (in low-cost Vanguard funds) across small, medium, and large-cap stocks after “Liberation Day.” Should I have done it earlier? Yes, but let me tell you why I sold, which I’ve never done before.
When you get right down to it, the reason is Occam’s Razor. That’s the philosophical principle that maintains that the simplest explanation is usually the best. “Liberation Day” only confirmed my view of US economic policy: We have none. There is no coherent policy on trade, taxes (including tariffs), interest rates, strategy for competing with China or anyone else, or any other approach to anything related to the economy and markets. We are no longer a serious nation with any reasoned approach to serious issues of the day. Everything has been reduced to a “deal.” There is no tomorrow or yesterday, only the moment, and no one can articulate a clear direction, including the President, who operates by whim.
The economy can’t function well amid such chaos. Companies can’t make plans to invest or hire; individuals can’t be sure if they’ll have a job or retirement savings. Everyone will default to “wait and see.” That sooner or later translates into recession. Meanwhile, regardless of what happens specifically with our on-again, off-again tariffs, the President’s obsession with them and unwillingness to recognize their harm will lead to higher prices. Presto, inflation plus recession, and we get the worst of both worlds—stagflation.
If that isn’t enough, we are well on our way to wrecking the post-war liberal order, which, despite flaws, bestowed the privilege of having the US dollar serve as the world’s reserve currency. I doubt the president has pondered what a disaster losing reserve currency status would be.
Brighter minds than mine, not a stream of cronies, should be helping to formulate a coherent approach to the nation’s economic policy. But that’s not going to happen anytime soon. The only thing we can rationally expect is more policy chaos—which was never the backdrop in previous market declines even if the policy had adverse consequences.
And if you think the president’s deal-making skills will be the answer, as a longtime ghostwriter who understands what it takes to get into the mind of the one you’re ghosting for, let me note what Tony Schwartz, the ghostwriter of Trump’s 1987 The Art of the Deal, told Frontline in 2016.
“I don’t think [Trump] has read a book of any kind other than his own in his adult life. I made a decision at the age of 35 to write that book partly as a lark and partly, or even more so, because it was a way of earning a bunch of money, and potentially a big bunch of money, quickly. I told myself a lot of stories to rationalize that, and it certainly never occurred to me that Trump would become president or even think of being president. But as he began to be more of a public figure, I felt responsible in some way for having helped to create the opportunity for him to go out there and have an impact. As we got to the point where he actually decided he was going to run for president, not just say he was going to run for president, now it’s almost like I created a monster. It’s ridiculously arrogant to say I created him; I get that. But I contributed to his creation, and in that respect I feel guilty, and I feel responsible to do my best to set the record straight before he ends up running a country that he’s not remotely prepared to do in a reasonable way. I don’t think Donald Trump has an inner life. I don’t think there’s something different going on inside him than you see going on outside him. It’s not just that he’s not introspective; there’s nothing in there to introspect about.”
That’s the nub of why I sold when the tariffs were announced. I realized that my belief that some sort of reasoned policy direction would eventually come from Washington, even if I disagreed with it, was a pipe dream. Sadly, in the immortal words of another writer, Gertrude Stein, I realize now that there is no there, there.
Comments, observations, suggestions? Please email [email protected]