Best Investing Advice: ‘Don’t Fight Trump’

August 24, 5:00 pm EST

The best investing advice over much of the past decade has been “don’t fight the Fed.”  The Fed needed stocks higher (to restore confidence and wealth — at least paper wealth).  And the Fed forced stocks higher. 

They did it through ultra-low interest rates and through a committment to backstop against any shock risks.  With that, despite the many threats along the path of the the global economic recovery, stocks went up.What’s the best investing advice of the post-election environment?

Don’t fight Trump.

Remember, we’ve talked about the “great handoff” on election night.  Trump finally represented an end to an era, where the global economy was surviving on central bank life support.  It was the handoff from a monetary policy-driven recovery, to a fiscal stimulus and structural reform-driven recovery.  And that handoff gave us a chance to get to a sustainable recovery — to escape post-recession stall-speed growth.

So no wonder, the influence of Trump on markets and global stability, is much like the influence of the central banks of the past decade.

Trump wants a booming economy. 

We need a booming economy to escape the stall-speed growth of the post-global recession world. So we have major economic and geopolitical undertakings in play to achieve a booming economy.  And just as the central banks wouldn’t let shocks undo the trillions of dollar they had committed to the recovery, Trump won’t either.  The central banks intervened often, either verbally, or through policy.  And Trump has intervened often.  Also, a lot of verbal, and plenty of policy responses.

The dollar and the Fed are the latest examples.  And today, we saw the influence and the outcome.  Trump has hand-selected the Fed Chair that is continuing the program of gradual rate hikes.  But Trump he sees higher rates, uncessarily threatening to curtail the growth picture, he’s “intervening.”

Below is some of his jawboning against higher rates …


And today, we heard from the Fed Chair at Jackson Hole.  People were looking for any indication that the Fed Chair might be influenced by Trump’s comments.

And here are the money headlines from his speech…

The Fed explicitly said under Yellen one time, that they opted against a rate hike because they were no signs that the economy was overheating.  That makes the second comment above very interest, regarding the expectations on the Fed’s movees for the remainder of the year.  And if they don’t see inflation accelerating above 2% (the first comment) then why raise rates again.

The market seemed to agree with that interpretation today.  The prospects of steady rates is a recipe for higher stocks, higher commodities and a lower dollar. And that’s what we had today.  I expect it will continue.  And this may have finally been the catalyst to get commodities moving again.

Have a great weekend!

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