We are just over a month into the Trump Era, and many are reeling. “Look what he did! Immigration chaos. Insulting federal judges. Bullying Mexico. Leaving TPP. Trashing Nafta. “Alternative facts”. And the tweets! He was probably wearing a bathrobe when he wrote the one about Sweden. Isn’t it awful for stocks?”
My crazy answer: No.
I’ve studied all this carefully - for markets, this is just noise. It heightens anxiety, but it is essentially sociology, which stocks ignore. Next year it will be forgotten, uncertainty will be down, and stocks up. So my central message remains - buy now.
Trump’s gyrations stir emotions. They shock and awe. Saying “ignore them” is like saying ignore a slap in the face. But noise doesn’t drive markets (much). Successful investing requires looking elsewhere. Noise is the market’s head fake.
Distance yourself, fathom Trump better, and you’ll do better. Ignore what he says. Instead, fathom why he says it. He’s different. Loud, blunt, seemingly uncouth. But is he unhinged? Nope. He’s planful and sly like a fox. Of all politicians, he’s the most skilled I’ve ever seen at head fakes. Classic negotiating tactic, perfected by the master of The Art of the Deal. Trump’s tweets and bombast are like a boxer or footballer’s feints. Opponents rarely figure him out, almost always underestimate him, and can’t realise most of what he says is a diversion to distract from what he really wants to do.
What does he want? To get his way - what he calls “winning”. Today, he’s doing unconventional things most folks say won’t work. Like putting unconventional people in government. But in 2020, re-election time, if America is fine, he thinks most myopic voters will forget today’s fuss and he’ll be seen similarly as fine. He’ll win again.
Trump categorises some into groups, such as the media, which he calls dogs. It’s in dogs’ DNA to chase rabbits, so he gives them “rabbits” to chase. Executive orders, tweets, rants, threats, accusations, “alternative facts” - all rabbits, for media to saturate their space - controlling their agenda. Woof, woof, woof. Otherwise, the media finds its own rabbits, and Trump loses control. He doesn’t care what they think of him. He’s delighted to play the lout, feed them rabbits, and quietly get what he really wants while they woof-woof-woof down the trail.
Things he really want include winning cabinet appointments. When his picks meet resistance, he throws the media more rabbits. Senate stalling on secretary of state? Immigration rabbit time! That distracted Democrats and media outlets long enough for Rex Tillerson to get confirmed.
Democrats stonewalling Supreme Court pick Neil Gorsuch, saying he’s a Trump-puppet? Better badmouth judges so Gorsuch can denounce Trump’s comments and show his independence. Except that denunciation was leaked by a Democratic senator (so not sensational enough). Better impugn the senator’s integrity so Republicans can back up Gorsuch, too. Now Gorsuch is a #NeverTrump hero, his confirmation a foregone conclusion. Trump goaded opponents into making his argument for him. Amazing.
This is precisely what happened last year. Trump won the election because he ran against the media, playing to Americans’ distrust of “experts” and talking heads. The media couldn’t see what he was doing then and remain blind. They think the masses will be as aghast as they are over Trump’s mispronouncing Tanzania or occasionally mixing past and present verb tenses. They’re willingly woof-woof-woofing while he gets on with “winning.”
It is strategically brilliant. Make your enemy an asset. The kids would say he’s trolling the media, like an internet comment thread goon. Trolls leave if you don’t feed them. Media would be best off ignoring it all, but they can’t.
To markets, this is all noise. Even the anti-corporate tweets and trade talk are indiscernible static you can’t profitably act on. Real policies, really enacted, really matter. Markets care about fundamentals - chiefly, future earnings potential - and Trump’s victory has not made the world a fundamentally different place (so far).
Trump did build a wall last year. It was a wall of worry for stocks to climb. No one knows yet what he is really about. Too many rabbits, thrown too many ways. A year from now we’ll know more, and stocks will melt up as all that uncertainty fades.
If you wait until then, when the coast is clear before you buy, you’ve waited too long. Stocks move first. You lived it last year post-Brexit. Buy now and enjoy the ride.
Ken Fisher is the founder and chairman of Fisher Investments
