Beware the Looming Trump Slump

132042464I am not a fan of our President. His leadership and values do not represent mine, nor those of many Americans. There are many who disagree. Regardless, he is our President. The Electoral College elected him and, for better or worse, his thoughts and programs impact our lives.

This is not an analysis of year one of his Presidency. Turn on a TV and you can get hours of analysis on his Presidency, pro and con, based on the news program you watch. On the plus side, on a financial basis the country has moved forward. Whether attributed to the growth of the Obama years he inherited, or the positive business climate he has created through lessened regulation and a new tax program that is very pro-business, or a combination of both, the economy is strong and financial markets have responded very favorably. For that he deserves at least partial credit.

No problem here. I selfishly am very happy to see our investments and the 401Ks of Americans (fortunate enough to afford to have one) blossom. All good. Unemployment declining even further. Good here too.

The tax program, the lax regulatory environment and the psychology related to them, have helped fuel the 2017 and early 2018 growth of the stock market. Financial analysts tell us that “fundamentals continue to be strong”, or some such CNBC language. On the other hand, I think the predicative qualities of analysts are often akin to weathermen who claim a forecast of “partly sunny and chance of rain”. Tough to be wrong when you hedge.

Let me provide a counter prognosis, a Strum Bummer—a day of financial reckoning is straight ahead. While we’ve seemed to have survived the short-lived government shutdown, the “irrational exuberance” (as Allan Greenspan former Fed Chair called it during the era) of the current markets is a scary proposition. There is plenty of evidence that the financial markets are driven my emotion as well as fact, and that the current run-up has now taken into consideration the positive impact of the tax program and regulatory environment, and therefore once we hit a bump, which we will, the pervasive negative feeling regarding our Administration may drive the markets down. “Lordy”, I hope I am wrong here.

In any event, regardless of who won the Presidential election in 2016, a downturn was/is inevitable. Ups and downs are facts of life in the financial markets. Alas, methinks our President has “owned” too much of the upswing and, my antipathy of his leadership aside, he will then be blamed heavily for the natural correction ahead, ironically in that case unfairly. Corrections are a part of the ebbs and flows of the financial markets. Students of the market know this well. Even novices with some age remember declines not just in 2008/2009 but earlier as well.

So Mr. President, you would be wise to caution us all about the future, rather than taking a victory lap and claiming sole credit for the strong market, though wisdom is not your strong suit.

My guidance to all is there is little downside to anticipating the forthcoming “Trump slump” and begin to tighten your belt before it comes. I am still a strong believer long term in investing in the market, though I feel myself becoming more conservative in the short term. No doubt a part of that is my age (Turning 65) and my generally conservative fiscal nature, and the reality that the market does not go up forever.

So take heed. A little frugality and conservative fiscal thinking never hurt anyone.

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