The Prudent Retiree - June 2019
“You’ve been telling me you’re a genius since you were seventeen.”
- “Reelin’ in the Years” by Steely Dan
Steely Dan is one of my favorite bands. I started listening to them in college and have never tired of their music. They are members of The Rock and Roll Hall of Fame and many of you probably enjoyed their songs over the years.
I studied economics in college. In Econ 101, the first law you learn is supply and demand. The next is the law of comparative advantage. Translated, that means tariffs are bad. Our President is not a fan of conventional economics. Remember that global tariffs brought about the world economic collapse (aka The Great Depression) of the 1930s. President Trump seems to like a fight—he’s now taking on the arc of economic history. The market reaction has been understandably shaky.
All politicians crave reelection. Mr. Trump is no exception. He won in 2016 by capturing working class voters in Rust Belt states that usually vote Democrat. Farmers were also staunch Trump supporters. Tariffs are hurting farmers and the Rust Belt. The President cannot alienate those voters or he will have no chance of winning a second term. Presumably, he knows that. It is dangerous to presume with President Trump, but Prudent Retiree believes we will reach trade accords and not enter a prolonged, disastrous trade war.
At the moment, other indicators are positive for the market. Inflation remains below 2%, interest rates are heading down again, employment is strong and the economy is humming. We believe you should stay invested. We are closely monitoring the trade situation and will suggest change if warranted.
Sometimes I wish I was back in the frat house listening to Steely Dan. President Trump told us that he is a “very stable genius.” We better hope so. If not, the economy, markets and our investments will all be reelin’.
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