By Steve Dinnen
In our last dsm Wealth newsletter, we surveyed the general economic scene as the new administration settled in in Washington. Now is a good time to scan the investment horizon, which is starting to reveal a more direct influence coming from the White House and President Donald Trump.
Trump’s impact started even before he took office. Shareholders of General Motors Corp. (full disclosure: me included) witnessed this firsthand Nov. 26, when the stock slumped 9% as President-elect Trump announced his intention to levy tariffs against autos imported from Canada and Mexico. GM counts on company factories in those countries for a significant portion of its output.
But Kelly Flynn, chief investment officer at Prospective Value Partners here in Des Moines, said “that day would have been a nice buying opportunity, since his actions rarely match his rhetoric.” Indeed, Trump firmed up his plans for Mexican and Canadian tariffs once he arrived in office, only to pause them hours later. (This just in: Auto tariffs are due to start April 2. Probably.)
It is certainly not in Trump’s interest to start a trade war, Flynn said. The president seems to pride himself on equity performance under his watch, and a trade war would harm that.
As Flynn put it, “I think the appropriate word for Trump’s effect on equity markets is ‘unpredictable.’ He says a lot of things, as we all know, and some of them will actually become policy. The key will be discerning the ‘signal’ from the ‘noise’ — admittedly, not an easy task.”
However, there may be some investment opportunities when the markets misinterpret the “noise” as a “signal.” History suggests that whenever this happens, there is money to be made. Flynn said the “Hillarycare” scare of 1993 proved in hindsight to be a great time to buy stock in pharmaceutical companies, and HMOs have been great stocks since Obama signed the Patient Protection and Affordable Care Act in 2010.
In their review of investment directions for 2025, Blackrock experts Gargi Pal Chaudhuri and Kristy Akullian offered three key takeaways:
• They expect the United States will continue to perform well amid solid economic growth, relatively easy financial conditions and the potential for tax cuts and deregulatory policies.
• They continue to prefer large-cap, high-quality U.S. equities and see tactical opportunities in financials. For investors with fixed incomes, they prioritize income over price appreciation and prefer the front and belly of the yield curve to long duration exposures.
• Uncertainty associated with trade and immigration policies could lead to slower growth, higher inflation, or both. They favor alternative strategies and asset classes to hedge this risk in an environment where long-term bonds have been an unreliable source of diversification.
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