Have you been enjoying our never-ending trade war with China? Well, you now get a 2 for 1 deal. There is a trade war with Mexico as well. The markets didn’t take this kindly and neither did the Mexican President, but, that’s another matter.

Ray Dalio, CEO of Bridgewater and an ardent Trump supporter, has repeatedly expressed confidence that Donald Trump can’t possibly be as stupid and dangerous as he appears. But, time and again, he has been disappointed. He had said what many would agree with – “The U.S.-China conflict is much more extensive than a “trade war.” It is an ideological conflict of comparable powers in a small world. What is now most important at this time of brinksmanship is seeing what actually happens next.”

Of course, he was thinking rationally and rationality is not in  the vocabulary of our President. And so, Dalio and others have gone quiet as Trump declared a trade war with Mexico, just to get back at the Democrats who refused to allow the building of the “Great Wall of Trump” along the Mexican border. If you are scratching your head to figure this out, you are not alone.

Future Wealth’s View

There is a saying in Wall Street – “Sell in May and Go Away”. We would just like “Trump to go away”. But, of course, Trump ain’t going away and markets are going to keep whipsawing until there is stable political governance.

In our article on April 28, 2019 following a mixed Q1 earnings season, (link is here:   https://futurewealthllc.com/what-is-q1-corporate-earnings-trying-to-tell-us-for-q2-and-beyond/) we surmised that “the message from Q1 corporate earnings is cautious optimism. While we remain heavily weighted in growth in our client portfolios, our positions in defensive names remain significant.”

It turned out to be propitious. Even as markets crumbled in May, every single one of our clients had returns that beat all three major indices. Of course, we could have never predicted that Trump was going to roil the markets and that defensive names would outperform the aggressive growth stocks. But, madness has become  the norm and hence the investment in deep value, albeit not so sexy, remains a perfectly placed strategy.

Yes. The hubris is nauseating. But, we can’t emphasize enough – focus on fundamentals. That means paying attention to corporate earnings. That’s what we do at Future Wealth LLC.