Changing the Game?
Jan 25, 2025
There are seldom single events which determine broader macro futures.
But every so often, a single outlier events does tend to change the course of history. But in most cases, we don't know until well after the event has passed.
Was Covid a game changer?
Was the Russian invasion of Ukraine a game changer?
Was Hamas' attack on Israel and Israel's response a game changer?
There is no doubt these events may be game changers.
But one event, the election of Donald Trump, is I believe a game changer. A catalyst which many of us are not prepared for.
The problem/issue is Trump's unpredictability. Most policy folks and economists thrive on a level of stability and certainty as they have fopr many year4s. But Trump may prove a confusion to them as he charts his own course for the United States. What policies he will follow because he does not adhere to any one ideology confuses many economists, will certainly be a game changer.
For investors, this can bring considerable volatility to our portfolios over the short term while everyone tries to figure out how to make money and survive the "Trump years". But it is important to remember that Trump only has 4 years to govern.
But I think there are broader forces at work than even Trump can influence. Demographics are going to shape labour markets with a shortage of workers and that will cause higher inflation.
Higher inflation eats away at our investment returns and so we should expect lower returns going forward.
Economic growth rates will most likely be higher from more government spending to make up for the decline in global trade and investment. Wage gains means higher consumption, but lower profit margins.
High stock market valuations and property prices will mean future returns will most likely be muted in comparison to the pre-Trump era.
There is no doubt a lot to consider and as investors we can only watch, be patient, and take advantage of the opportunities as they arise.
Markets tend to do surprising things so we need to be ready both both upside and downside scenarios.
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