This is a big deal. I am also seeing the same views in the UK. The US is becoming an emerging market in terms of political and economic stability.
Yes, the traditional view of the US being the best long term market may be changing.
I have a call on Tuesday with our pension fund managers (one of the Maple 8 investment managers) and have asked in advance how their long term view on US investments has changed.
It’s been pretty well established that having a trade surplus and being seen as an attractive investment venue are goals that are in conflict. Being an attractive investment venue drives up the value of your currency which in turn makes exported goods more expensive and imports cheaper.
It’s apparent that the balance of trade is more important to Trump than being seen as an attractive investment. Seen in this light it’s easy to see why Trump might view destabilizing the US economy as an acceptable move.
In practice, though, there are many difficulties with Trump’s approach.
- It will require huge investments to build the factories that would produce good to replace those that we import. Who will commit those investments if the US is not an attractive investment venue.
- The US has a labor shortage and US policies limiting immigration make this situation even worse.
- The US national debt needs to be financed, if investors no longer see the US as an attractive place to invest the US debt financing cost will rise.
- With tariffs changing every other day, investors and businesses will not have the confidence to plan and invest for the future.
I’d add one little thing.
Political risk when considering a foreign investment is basically about how much you can rely on the rule of law to protect your property rights. Trumps behavior casts doubt there. Due process appears to be optional now. Just spitballing here, but I’d expect a 25 to 50 bp bump on yields. And that’s all U$D assets, not just govt debt.
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Only a 4% bump in Apple stock when I last checked so will not sell my son’s holdings yet.
And yet the rate of people buying houses they couldn’t afford went up when rates were low
I’m not sure low net worth people never spend their money on things they shouldn’t be buying
The frequency of tattoos and multiple pets is sometimes >0
Not to mention betting and alcohol
Are you using the avocado toast argument?
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I suspect having money troubles because of buying a house you can’t afford was a more common occurrence than having money troubles because you were buying avocado toast.
I also suspect yearly spending per capita on tattoos is more than yearly spending per capita on avocado toast.
Well, it wasn’t so much that people bought a house they couldn’t afford, it was they bought a house in a way that they could afford to walk away from.
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Housing is different because people rely on experts to tell them what they can “afford”, and the experts reference interest rates. Nobody asks an expert if they can afford a payday loan.
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The wheels are starting to come off US Equity and Treasury markets as Trump and his incompetent sycophants (Hassett) continue to intensify their attacks on Powell and the Fed.
The US economy is in serious danger at this point if the Fed is perceived to lose its independence. International investors will absolutely head tor the hills.
Powell’s term runs out in May 2026, and its looking likely that Trump will try to appoint an apparatchik to replace him.
The US would become uninvestable at that point.
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I heard a discussion on Bloomberg that observed:
- While Powell’s term as chair of the Federal Reserve lasts unitl 2026, his term on the Fed’s Board of Governors runs until 31 January 2028.
- Members of the Fed’s Board of Governors hold seven of the eleven seats on the FOMC. So Powell is expected to stay on the FOMC until January 2028.
- While it is customary that the chair of the Fed serve as chair of the FOMC, it is the FOMC that chooses its chair, not the President. They could conceivably choose to keep Powell as chair despite custom.
The world seems to be segmenting into three main trading blocks dominated by China, the EU and the US. China and the US are both putting pressure on other countries to provide favourable trade terms to only China or the US. Many countries, such as Canada, are caught in the crossfire so have to lessen their trade dependence with both the US and China. The EU, some Asian and South American markets as well as domestic markets will see a greater focus by Canada as they pivot away from US.
EU is pretty close to a full agreement with Mercosur so that will benefit trade in that direction.
US is mainly just hurting itself with its behavior.
China will be damaged, but they can pivot away from the US as they had already started to diversify away from the US.
Canada has a delicate balancing act ahead of it due to its geographical location. You can’t really avoid trading with the US because of proximity, so EU and South America probably makes the most sense when it comes to diversifying trade away from the US. Trading with China would be tricky (and probably political).
We’re going to go retest 4850 before too long.
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I clicked on today’s action on UNH. I thought it was bad until I clicked on the 5 day! 
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Well, 2/3 of the way into April it’s about 4.5x more absolute loss for my portfolio than any single prior month. It totals more loss than the next 5 worst months combined.
Canada will keep trading with the US as the US will always needs its natural resources but I think there will be much less in the way of manufactured products moving between the two countries. They will each focus more on their domestic markets.
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