President Donald J Trump isn’t the first and likely not the last to use ‘big stick diplomacy’.
Theodore Roosevelt popularised it in the early 20th century. It became the origin of the saying, ‘Speak softly and carry a big stick.’ Of course, when it comes to President Trump, the saying has a new variant.
For Mr Trump it’s ‘Speak as loud, boastful, and confidently as possible, and carry a big stick.’
Despite the criticism, it seems to be working for him. During his first presidency, the tendency seemed to be for other country’s leaders to mock Trump. This time they aren’t being so flippant.
The important issue is whether Mr Trump’s style of ‘Big Stick’ diplomacy will result in a generally more peaceful and cooperative global economy – resulting in an economic boom – or whether it will be a continuation of the Biden era state of permanent conflict.
Perhaps we’re being naive, but our temptation is to think the former rather than the latter. For no other reason than Mr Trump’s informality and brashness tends to mean no-one knows what he could do at any point in time.
America’s allies have no idea, and neither do its foes.
This unpredictability is the opposite to what most folks always say about the markets. You’ll often hear the pointy-headed smarty-pants on Bloomberg and CNBC say that the one thing markets hate is uncertainty.
That may be true.
But since April, when President Trump’s tariffs kicked in, the US S&P 500 index is up 20%. The market is back to its peak. Are things any more certain today that they were two months ago?
Folks everywhere still don’t know what the tariff levels will be a month or two from now or even a year from now. They don’t know on which products or services the tariffs will ultimately fall. They don’t know if tariffs will be a net cost or net benefit to the US or any other country’s economy.
So why are markets back at a record high? Especially with all that uncertainty.
It’s a similar story for other markets. The UK and German markets are back near record highs. The Australian market is back near the top. Even China’s market is barely 10% below its recent short-term peak (although down almost 50% from the 2007 high).
Perhaps it isn’t the case that markets dislike uncertainty. Perhaps the stronger urge is that markets like disruption – things or events that shake-up a current trend. Something that could result in a new trend emerging.
A new trend that can create new opportunities for existing and new companies. Maybe that’s being too optimistic. After all, excluding the ‘Covid crash’ of 2020, the markets have mostly been in an uptrend for the past 16 years.
Is it genuine optimism about something new… or is it hope that the market can eke out another year or two of gains?
We don’t know for sure yet. Except to say that it’s definitely not the time to be ‘all in’ on the market. We prefer a conservative approach – one-third stocks, one-third gold and silver, and one-third cash.
It’s not the most elaborate or exciting portfolio. But it’s an asset allocation that helps us sleep reasonably well at night.
Cheers,
Kris Sayce
Editor & Publisher, Investor’s Daily
What you may have missed…
Everything is Rigged… Until You Hack It
In 1999, a few film school grads with a camcorder broke Hollywood. They had a tiny budget, no stars, and no real industry connections. So they got creative. They convinced the world that a witch murdered a group of students in the Maryland woods. They listed the actors as “missing, presumed dead” on IMDb. They made fake news reports about the “real” Blair Witch legend. They put up wanted posters for the missing students. And the internet—just barely becoming a thing—did the rest. Read more here…
Lost Generations
Fox News’ Kayleigh McEnany said that now “every dictator in the world is on notice.” Trump had sent them a “powerful message.” But it may not have been the message most Americans would want them to hear. The bombers say they are only trying to keep Iran from getting a nuclear weapon. But Iran had already agreed not to make a nuke. And it had gone along with diplomatic negotiations…rules…inspections…non-proliferation treaties — all intended to keep it from doing so. Read more here…
Elon Musk’s $1 Trillion bet on AI on Wheels
What if I told you that Tesla didn’t just launch a new product in Austin this week… it launched another trillion-dollar value opportunity? Because right now every second post on my X.com account is someone fawning and swooning over the new RoboTaxis in the heart of Texas. This week Tesla launched a real-world fleet of RoboTaxis, peacefully zipping around Austin, fully autonomous, fully operational… and based on what I’m seeing, fully awesome. Read more here…
Interest Rates, Observed
Lower interest rates encourage borrowing. That’s the whole idea. Debt goes up. Spending goes up. The feds ‘print’ more money to cover their deficits. Prices rise further. Read more here…
T Not Fame. Not Fortune. Freedom.
What does real freedom look like? For Gary Vaynerchuk, it’s not about money or fame. It’s about never having to ask permission. In a raw conversation on The James Altucher Show, Gary shares why entrepreneurship is the path to true freedom — if you’re willing to put in the work. Read more here…
