Here we are… Are we there yet?

Henry Jennings | Marcus Today 

I have been in financial markets for a long time. I’ve seen my share of crashes, meltdowns, spasms, and crises. Most are hard to pin down—exactly how and why they came to be. There are frequently periods of irrational exuberance. Some new technology is going to change the world. We invent new ways of valuing shares and then… someone yells fire! And things get messy.

We’ve seen a US market boosted by ‘exceptionalism’ and the life-changing AI experiment come undone. It’s not been dissimilar to the Dotcom boom in some ways. Everyone was bullish. Everyone was partying like it was 1999—and then whack. A trigger. The emperor is called out. Nothing specific to burst the bubble, but this time it really is different. Something very specific this way comes. That something is Donald J. Trump.

It was only last week that OpenAI was valued at US$300bn. That number had doubled since October. Tesla had the worst set of sales numbers in years—and the stock rallied. Not for long, mind you. Strange things were going on. The US had its ‘Sputnik’ moment with DeepSeek, then moved on. A flesh wound. No one really believed that Trump was going to burn his playhouse down. Pretty soon.

He had used the US stock market as his go-to measure of success during Trump 1.0. He even said during the campaign that if Kamala Harris won, the stock market would tank. So much for that.

Trump is clearly playing a bigger game than just a popularity contest. It’s not like he has to worry about being elected again. I know he says there are ways around that—but that would be a bridge too far, even for Trump. For now, it’s all about legacy. It’s all about making America great again. His legacy is to reset the global trading environment, abandon 80 years of free trade and globalisation, and throw out the playbook.

His real legacy—if he pulls it off—will be to get the US debt under control. Without that, the US is held ransom by its competitors and rivals. It has to fund that debt. It was costing the US $1.2 trillion in interest costs alone—more than defence spending.

Trump had a number of goals: get energy costs down, get interest rates down (bond yields), get US spending down, get the USD down. That helps exports. If the US were a PC that had frozen, you’d turn the machine off and then back on, hoping the reset sorts out the problem. The US has tried that before. Yes, the machine does turn back on, but it looks pretty similar to the old operating system. And that was broken. At least in Trump’s mind.

Something had to be done. A President with an overwhelming mandate and a king-like belief in himself was probably the only one who could break the system, push reset, and turn the machine back on to get a whole brave new world. A new operating system. Windows 12.

Wall Street has a nasty habit of ignoring things. It ignored the ridiculous valuations of the dotcom bubble. It conveniently ignored the sub-prime debacle. It ignored Covid for a time, until Americans started getting sick and it ignored what Trump had been saying. At its peril as it turned out. This ‘shock and awe’ was always going to be painful. And that pain is going to be shared around, he has made sure of that—investors, Americans, Tech Bros, China, the EU, Australia, commodities, oil, gold, crypto. Everything. And everyone.

And this is not a V-shaped recovery scenario. Not an issue that will be solved in a day or a week. This is going to be ongoing. It will take a while to play out.

One thing is for sure: if you push back against Trump, he will just go harder. His base is still supportive. For now. That could change for midterms next year.  The Tech Bros may be having second thoughts, mind you. Not sure this was in the brochure.

What should Australian investors do in all this turmoil?

Firstly, in the words of the great Douglas Adams: “Don’t Panic.” You’ll probably do the wrong thing. It would be easy to get caught up in the daily volatility, running around like a headless chook selling everything, only to have a rethink a day later and plunging back in for the bounce. That never comes.  Don’t assume this is going to be a V-shaped recovery. It’s not. This is the biggest seismic shift in the global order since—well, since whenever. It’s not going to be an easy fix. Not easy to model the implications

Trump is serious, and the administration truly believes it’s doing what’s necessary to make things better. In the long run. It would be trite and easy to say, sell the rallies and buy the meltdowns. That could well pay dividends. It may be better to ensure you’re not leveraged, and that you’re confident the companies you hold have a strong balance sheet and can weather the storms.

There will be some bargains around—but they may linger. It will give investors an opportunity to consider whether they really are bargains, or just a trap for the unwary. Be cautious and tread carefully. Be patient and stay nimble. This could take years to work through and model—or it could be over with the flick of a Sharpie (available in the Olde White House Gift shoppe for only US$33).

The best thing you can do, even though I am slightly biased is to subscribe to our newsletter. I will leave you with another quote from Douglas Adams.

‘To give real service you must add something which cannot be bought or measured with money, and that is sincerity and integrity.’  That is something we try to do every day! Making market predictions is slightly harder. But we try!

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