Orange Chaos.
Photo by Alejandro Cartagena on Unsplash
Has it only been two months since Trump has been president? It feels a lot longer!
We have a tough four years ahead of us for many reasons. But before we talk about that, I want to set the stage for how we can best think about the challenges we face with Trump in the White House.
I think it is best to compartmentalize thoughts and feelings into two categories.
How does this affect us socially?
How does this affect our investmets?
Tomes have already been written about how Trump's actions from his first term have affected Americans and the world socially. The greatest hits are:
Abortion is now illegal in over 20 states. Women whose lives are in danger from nonviable pregnancies are having a hard time getting an abortion because doctors don't want to go to jail for murder. The stories coming out of the US about this are heartbreaking. I wouldn't want to be an OB or ER doc in those states.
The Supreme Court has ruled that the President cannot be charged with a crime, so long as it is an official act. What's an official act, though? The centuries-old doctrine of "all equal under the law" no longer exists in America.
The Emoluments Clause prohibits the president from profiting from his position from foreign or domestic government. But Trump continues to play golf at his golf courses, paying himself millions of taxpayer dollars to house his staff and security in his own hotels every time. Then there’s foreign officials staying in Trump’s DC hotel which should strike everyone as beyond the pale.
When society sees the most powerful person in the world ignore laws and act with impunity, the public's faith in doing the right thing evaporates. Why play by the rules if the 'leader of the free world' doesn't have to?
In the past two months a dizzying amount of corruption has been on display from using the White House in a Tesla advertisement, having the commerce secretary tell the public to buy Tesla stock to Trump pumping his own meme coin. If you don't know what that last one is, consider yourself lucky.
I could go on, but if you read the news every now and then, you know what's happening. My American lawyer friends can hardly make sense of what they see.
Here's the hard part. Two things can be true:
Trump is causing a lot of domestic and global unrest.
Investments will end up being okay.
As I write this at the end of March, the US stock market is down about 10% since Trump took office. So that last statement is a bold one to make right about now! But, stock markets outside of the US are doing much better, including Canada.
Here are the big concerns for investors in public companies right now:
Tariffs
Boycotts
Why are tariffs always 'slapped'?
Right now, we don't know what tariffs are staying and what aren't, and that's frustrating to businesses that have to manage their supply chains. It's like when you were in big trouble as a kid and you got sent to your room while your parents discussed your punishment. Were you going to be grounded, or worse? For how long? Wasn't waiting for the punishment the worst part? No? Just me? Ok.
I can't say that anyone outside the White House knows the end game with tariffs. But waiting for certainty causes more damage than tariffs do.
If tariffs stay, companies will adjust supply chains and prices to accommodate. People will pay more for stuff or change their buying habits. We made it through high inflation after the COVID-19 pandemic, this will be more or less the same. Outside of the White House everyone knows that tariffs are a tax that consumers pay. It's like adding an extra HST.
To that end, Canada's counter-tariffs are a tax, on ourselves. They slap a tariff on us, we slap a tariff on them. But it's like pressing your cheek up to theirs while you slap the opposite side of their face. Sure, they might get the bruise, but you're really just hitting yourself.
Boycotts are okay now?
Love him or hate him, Doug Ford's move to take American alcohol off the shelves of the LCBO is even more punishing than tariffs for American whiskey makers. Thankfully, other provinces are doing the same. A lot of farmers and producers in and around Kentucky voted for Trump and are about to have a lot of inventory on their hands.
But boycotts aren't likely to happen for necessary items. Boycotting Apple and Google because they are American would mean everyone goes back to the pre-smartphone Stone Age, where we had to go to someone's house to look at their vacation pictures! Actually, that sounds kinda nice…
Boycotts make great headlines and get the patriotic blood pumping, but if you are worried that they will bring the global stock market to its knees, rest easy. If the world stops buying Teslas, yes that stock will, and already has, tanked. But if you need a car, you need a car. A good friend sold his Model Y and bought an Audi E-tron. Tesla's loss will be another company's gain.
If you own a globally diversified portfolio that follows the best evidence in finance then you will own the company that replaces the boycotted company. If you know someone who is trying to predict the future by picking stocks or hiring someone to, send them this email. Nothing is predictable with Trump in office, and that doesn't mean you have to stop investing for four years!
There will be turmoil. But this too, shall pass.
What Trump means for Canada
The US stock market is taking a beating right now because of Trump's trade war. But he can't keep tanking it for four straight years. Whatever his game plan is, it better start working fast because he's in his final term in office. I know there is a cabal of MAGA elite who want him to stay in power longer, but he will be 82 at the end of this term!
If you or your family are concerned about what's going on. My first advice is to be grateful that you are in Canada. We are seeing immigrants rounded up and sent to detention centres with no due process. That's scary. Thankfully, we aren't the 51st state and are safe from that.
Tariffs might mean job losses, demotions or pay cuts in the affected industries. You will see headlines every time a company has layoffs because that's the topic that will get eyeballs reading the news right now. But it is very hard to move a car plant. I worked in one to pay for university, and they are HUGE! The Toyota car plant in Cambridge and Stratford employs over 8500 people, plus potentially ten times that number who work at feeder plants that make the parts. Moving all of that to the US would take longer than Trump's time in office.
The Bank of Canada expects long-term tariffs to cause a recession in Canada. Given that we have been in a per capita recession for two years that was hidden by outlandish immigration, I believe them. Take a look at how you can tighten your belt or pick up extra clients or hours at work/clinic/hospital to have a cash cushion.
What Trump means for your family
Tariffs are a tax. Be prepared for further inflation here and lower sales in the US. If you have relatives whose jobs are vulnerable to tariffs, start saving money in case they need help down the road. Food bank use has already been off the charts due to our disastrous housing and immigration policies. I wouldn't want my relatives relying on that.
Secondly, reconsider traveling to the US both to support tourism here or in countries not seeking to annex us, and because traveling to the US, especially as a visible minority, is becoming dangerous.
U.S. Border agents have the right to copy the entire contents of your phone when you cross the border. The Canadian Bar Association recommends lawyers wipe their phone and laptop of all data before crossing the border to protect confidential information. If you have business or patient information on your devices, you might consider doing the same.
Trump has openly threatened to ship Tesla protesters to brutal foreign jails. They are detaining immigrants and permanent residents for supporting Palestinians in hellish conditions in private prisons. I am putting my family's long-awaited Disney World vacation on hold. Send me your best non-American family vacation idea. I will compile a list and send it in my next email.
The land of the free is no longer the USA. It feels a lot more like 1990s Syria when I visited there and couldn't say a word against the then-president, Hafiz Assad. As I type that, I feel a twinge of hesitation to publish it in case it comes back to bite me when I want to enter the US in the future. Weren't we criticizing China for these types of anti-free-speech actions not too long ago?
So, maybe road trips to either of Canada's gorgeous coasts or restaurant hopping downtown are the new summer vacations for the next little while, eh? Or maybe this is the time to dust off our pre-pandemic sociability and bring back the weekend BBQs!
The value of an advisor happens now
I'm often introduced to my clients' friends and family who haven't heard from 'their guy' in ages. With what's happening with Trump, now's the time to find out if you are a valued client or not. If you haven’t heard from your wealth manager, it might be time to find a more attentive alternative.
If you are currently self-managing but find yourself checking the news or your social media groups to find reassurance during times like this, maybe it is best you delegate this aspect of your life so you can focus on your work and family. I have to read about Trump, there's no reason you have to too!
If you know anyone who is stressed about Trump's effect on the economy and their investments, please send them this email. It's also posted on my website. If you are interested in having a conversation with me about your stuff, please book an Initial Dream Board call at the bottom of my site at www.wealthcareprofessionals.ca/getstarted.