How Trump's policies are affecting my investment choices

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Like many investors, I consume a lot of news about U.S. president, Donald Trump. As one of the first wave of post-war North American baby boomers (he was born in 1946), it’s ironic that this “wealthy boomer” seems perennially to be a threat to the wealth and imminent retirements of his fellow generational cohort. Not surprisingly, there are a multitude of books written about Trump now that we’re nearing the halfway mark of his first—and hopefully last—term. I noticed that recent listings of the New York Times non-fiction bestsellers (contained in the Sept 9^th Toronto Star) include no fewer than six books about Trump: In fact, four of the top five are about the Trump presidential phenomenon: Omarosa Manigault Newman’s Unhinged at number 1, followed by Craig Jarrett’s The Russia Hoax; Jeanine Pero’s Liars, Leakers & Liberals and Craig Unger’s House of Trump, House of Putin. Further down is Ann Coulter’s Resistance is Futile, billed as her response to a supposed Liberal overreaction to the Trump administration. And now Stormy Daniel’s new tell-all—Full Disclosure—has been released, it no doubt will shortly add another Trump tome to the bestseller list.

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A week before, the No. 1 non-fiction book was Everything Trump Touches Dies, by Rick Wilson, who is billed as a Republican strategist who “gets real about the Worst President Ever.” He uses the amusing term “Trump’s Troll Party” to describe Trump’s brand of the Grand Old Party. He notes there’s no shortage of books decrying Trump from the left and makes the case for a critique from the right (which, I’d add, you can also get from Coulter, Conrad Black and David Frum, more about which shortly). I read a preview and have it on order from the library. You can get the flavour from the introduction: “This jackass … his blustering ego, fever-swamp birtherism, and con-artist operandi.”

READ: Will markets crash if Trump is impeached?

Note that there were a handful of biographies of Trump before his ascension to power: I once reviewed Michael D’Antonio’s Never Enough. But those constitute a mere literary trickle compared to the torrent of books that are being released in this his second year in office. As I began to write this, I had just finished reading Bob Woodward’s Fear. Actually, I was disappointed by it: most of the “juicy” revelations were already mentioned in the initial wave of media coverage, which was extensive. Woodward is certainly even-handed and no doubt accurate. The one consistent point he returns to constantly is well known: Trump is considered by many, including senior White House staffers, as a compulsive serial liar. There’s little doubt in my mind that I’d take the word of the journalist who helped bring down Richard Nixon over a fabricator like Donald Trump. Or for that matter, a pornstar like Daniels, whose book about her affair with him makes Trump’s denial look ridiculous. While I don’t have space to do in-depth reviews of all these books, I’ve certainly got an impression of them and they don’t make me feel good about having a lot of stocks in my portfolio, whether the U.S. itself, Canada or the China-heavy Emerging Markets. That doesn’t mean, however, that I have fled to cash. Apart from a prurient interest in the topic, I’d hoped to get some insight into the possible implications of this presidency for the global economy and stock markets. In all things, balance and moderation, so the first thing I’d counsel is for Trump students to consider authors from both the pro- and the con- side. In the pro-Trump camp, I would include The Russia Hoax and Liars, Leakers and Liberals, both written by Fox News co-hosts (I’ve not read them but assume the Fox affiliations and titles qualify as pro-Trump. In the same camp would be Coulter’s book (which I’ve not read) and Conrad Black’s A President Like No Other, which I did read and largely enjoyed.

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Most of the other books are either mildly or vehemently anti-Trump. In the latter camp is one I only previewed on Kindle: Nathan Robinson’s Trump: Anatomy of a Monstrosity, published in February 2017, soon after the inauguration. But the floodgates of books focused on the actual Trump administration really opened early in 2018 with Michael Wolff’s Fire and Fury. It was clearly rushed out and the main source was Stephen Bannon, whose subsequent departure from the Trump team was largely attributed to the damaging revelations he passed on to Wolff. I didn’t learn much from the book that I didn’t already know from reading the daily torrent of Trump coverage from the mass media and social media.

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Much better from my vantage point was David Frum’s Trumpocracy: it is a lot more insightful and critical of Trump than Wolff was, and coming from an author with Republican sympathies (remember Frum was for a time George W. Bush’s speechwriter) that much more credible. While largely respectful and balanced, Frum makes a case for the Republican party to heal itself. Conrad Black’s book I found to be surprisingly pro-Trump and I found it a good counterweight to all the blatantly anti-Trump books. If all you ever read about Trump was from hysterical Liberals, you’d have long since been in cash or even a money-losing net short position. While Black doesn’t dwell on the financial implications, I was left feeling comfortable about maintaining a balanced portfolio for as long as Trump is in charge. Black has at least met Trump in person and even done business with him in the past. There you can read seemingly praiseworthy descriptions about Trump, like this: “desperate cunning, unflagging determination, unshakeable self-confidence, ruthless Darwinian instincts of survival, and a sublime assurance that celebrity will heal all wounds.” Fairly balanced between the extremes is fired FBI Director James Comey’s A Higher Loyalty, which is a bit too self-serving for my liking but does provide plenty of insight into Trump’s character during Comey’s brief tenure with him, not to mention all the pre-election controversy involving Hilary’s emails. Still, for sheer entertainment value and to prevent one from being so complacent as to stay 100% in stocks, you need to peruse or at least sample a couple of the more over-the-top Trump books. Many of these are available free at libraries, often as e-books or audiobooks. They include Keith Olbermann’s Trump is F*cking Crazy (That’s the way the title actually appears in print; it’s subtitled This is Not A Joke), which I’ve been listening to and two that I plan to: Assholes: A Theory of Donald Trump and One Nation after Trump. If you’re looking for salacious dirt from Bob Woodward, forget it. If you are seeking over-the-top vitriol about the entire Trump administration, then Olbermann is your man: complete with allegations of treason and the imminent destruction of democracy as Vladimir Putin’s alleged puppet, and multiple arguments for his removal from office by the so-called “Resistance.” The audiobook consists in the main of a series of Olbermann’s live broadcasts from before the election through to the inauguration and beyond, and it’s entertaining to see the rhetoric escalate after the election win and inauguration. But most disturbing is Bandy Lee’s The Dangerous Case of Donald Trump, a collection of essays by psychiatrists who believe Trump is actually crazy as opposed to crazy like a fox. It makes Hillary Clinton’s famous warning about the Tweeter in Chief’s access to the nuclear codes that much scarier, especially when you read in some of these books (notably Woodward’s) about his confrontations with North Korea’s “Rocket Man,” Kim Jong-un.

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While the genre of anti-Trump books makes for titillating reading, they don’t do much to calm investors. If these formed your only diet you’d be tempted to move to cash tomorrow: certainly, you’d exit China and Emerging Markets, and probably Canada, given the antics over NAFTA. I suppose if you believe Trump will survive not only his first term but also a second term (at which point he’d be 76!), you might stick with U.S. stocks on the theory that America First tactics will continue to stimulate the U.S. economy and market, albeit at the expense of the rest of the world. One financial advisor who has long been concerned about Trump’s mental state didn’t want to be identified here but told me this: “I wholeheartedly agree that one must be cautious. DJT (Trump’s initials) and his erratic behavior confluences with other negative elements as well. Rising interest rates, stock valuation levels where values are hard to find and the longest running bull market in history that is long overdue for a significant correction … Everyone should be nervous about their money given this confluence of events. Add mid-term elections with the possibility of Republicans losing control of the House putting impeachment on the table, DJT would be tempted to create a major distraction with serious consequences in order to rally the nation, hold on to power and protect himself.“ Certainly, I felt the combination of Black’s book and Woodward’s provide a more even-handed overview of the economic and market implications of either a continued Trump presidency or what might happen if he were removed from power. Woodward’s views on NAFTA have been well reported in the Canadian press and if it wasn’t clear already, he makes it clear that Trump is single-minded in his belief that running trade deficits with other nations (friends or foes) is a bad thing for America, and that punitive tariffs are a good thing, however appalled many of his advisers were about them: Woodward provides a lot of insight into some of the advisers that early on helped to rein Trump in on trade and tariffs (notably National Economic Council chairman Gary Cohn and Staff Secretary Rob Porter), and whose subsequent departures left him free to indulge in his pet beliefs and an escalating global trade war which may be hard to reverse.

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Recently, TSI Network’s Patrick McKeough (publisher of The Successful Investor and whose book we reviewed in this space recently, here) had some good insights into this: he said he hasn’t come around to the “media consensus that Trump’s latest outrage all but guarantees his eventual impeachment … As I said early in the trade hostilities, although Trump started out attacking all important trading partners of the U.S., he was mainly gunning for China. Now he seems to have stage-managed things so that key U.S. trade partners—Canada, Mexico, and the EU—are finding less to object to in his demands. Maybe they’re coming around to the view that regardless of Trump’s demands, they have more in common with the U.S. than with China, on trade and numerous other questions.” As for my own conclusions after all this, I tend to believe Trump will survive the first term so don’t expect anything too dramatic until then. Emerging Markets and China are already in a bear market but Canada seems to have largely dodged the NAFTA fallout. With U.S. markets still near all-time highs, my inclination is to keep portfolios balanced both by asset class and geography: if Trump can continue to defy the odds and the U.S. market claws ever higher, I’d be gradually taking partial profits and rebalancing into areas already badly hit by Trump: notably Emerging Markets and China and, if it comes, Canada. Keep in mind the markets have been confounded by Trump since Day One: except for the first half day after his unexpected electoral victory in 2016—when many feared his very election would trigger a stock meltdown—Trump has been a boon to at least the U.S. market. Whether it follows that they would fall if he were to leave is unknowable. But that goes for life in general and especially the future of financial markets. Jonathan Chevreau is founder of the Financial Independence Hub, author of Findependence Day and co-author of Victory Lap Retirement. He can be reached at [email protected]

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About Jonathan Chevreau

As MoneySense’s Investing-Editor-at-Large, he is also author of Findependence Day and co-author of Victory Lap Retirement. Reach him at [email protected], where he is the founder of Financial Independence Hub.