This week is my first anniversary with Heather. It’s been quite a year of growth, challenges, wonderful experiences, and a lot of laughs. I’m looking forward to many more years of navigating a beautiful journey together. It’s not easy to find one amazing partner in life, let alone two, so I am a very fortunate person. Heather has honored my past with Roneet and helped me continue to grow while feeling supported in every way. Life is so much more full and rewarding when it can be experienced with another person.
This is what Joseph Campbell said about marriage that Heather and I try to use as a blueprint for our marriage:
If you go into marriage with a program, you will find that it won’t work. Successful marriage is leading innovative lives together, being open, non-programmed. It’s a free fall: how you handle each new thing as it comes along.
Speaking of each new thing as it comes along, Joseph Campbell’s advice is also quite applicable to being an investor in the world of Donald Trump as President. One always has to be on his or her toes and be prepared for whipsaws in market reactions to statements he makes and policies he intends to implement, even if they may be part of his negotiating strategy. Tariffs are front and center right now and they are starting to have an impact in terms of business confidence and actual results.
I have recently written that there are a lot of crosscurrents to weigh for investors. Right now it appears that economic activity has been front loaded in anticipation of the implementation of U.S. tariffs. Copper is considered an excellent barometer of economic activity and from this chart one can see we are at new post-Covid highs. This suggests a very sound global economy.
Exports from South Korea are also a good gauge of global economic health and these too are holding up quite well.
The same goes for Taiwan.
Things change dramatically, however, when it comes to expectations for the future. The Philadelphia Manufacturing Index and the corresponding outlook are prime examples of this. One can see that while the manufacturing index is dropping, it is still in positive territory. The outlook, however, is collapsing, which isn’t surprising given the uncertainty around the impact of tariffs.
The same is true for new orders. Both are coming down but the outlook is collapsing as well. I must say, however, that it is typical for the outlook to be more pessimistic than the current day reality, but one can see that the expectations component of the index has fallen off of a cliff virtually overnight, which is not as typical.
Perhaps Canada is a canary in the coal mine as small business optimism has collapsed and could be a harbinger of tariffs rippling through the global economy.
One can see the drop that just took place is on par with what happened after 9/11, the depths of the Great Financial Crisis, and COVID.
Every industry experienced a drop.
This table shows how every industry expects to be negatively impacted by tariffs.
The Fed is in a bit of a quandary as inflation was leveling off and expected to come down before tariffs but now is expected to go higher. This makes its goal of continuing to lower rates more challenging, although it is committed to at least two rate cuts in 2025.
All roads lead to high end earners continuing to spend to hold up the economy in the face of higher tariffs and cuts in government employment. One can see that their savings remain quite elevated post-Covid while the other 90% have dropped quite significantly.
Of course Nike has challenges related to management missteps, but perhaps it too may be another canary in the coalmine of slowing consumer spending. Nike’s stock had a big drop on Friday as its earnings disappointed and the outlook was challenging given the tariffs that were expected to be implemented.
Finally, we have been saying that apartment rents are too low relative to the cost of building new communities to justify taking development risk. And if what the Related Group CEO says is true, then rents would have to rise even more to close the significant gap between current rents and required replacement cost rents. This adds to the growing favorable risk-reward balance for purchasing existing apartment communities in growing areas at prices below replacement cost.
Tariff’s generally are not nearly as effective as would be indicated by the pronounced rates; much of international goods traffic goes through an intermediary before reaching its final destination.
We have a huge disparity in our U.S. distribution of income and wealth. The trillionaires have $5.5 trillion in wealth — more than the bottom 50% of families.
The ride with Trump is very bumpy. I support some of his objectives and am mostly disturbed by with persona —- very opinionated and too quick.
DOGE may be clumsy but our government is bloated — a pox on the past CONGRESSES of the last 5 decades.
Cheers, Chuck