The next recession is overdue. In April 2013, I wrote about the soaring Stock Market and progressing economic expansion. I assumed then that the next recession would start in 2014-15 based on National Bureau of Economic Research data indicating an average business cycle of 66 months. Today, four years later, over 84 months since the last recession ended officially in 2009, the Stock Market continues to climb to new heights. But all isn’t well. We have a major unknown that could cause significant market gyrations independent of current or projected positive economic data—Donald Trump.
The Next Recession: Donald Trump is the wild card
To be sure, Donald Trump is the wild card. His behavior could hasten the next recession. Maybe the fifty previous Republican National Security advisers were right. In their August 2016 letter, they said he “… lacks the character, values, and experience to be President… displays an alarming ignorance of basic facts of contemporary international politics…” They provided other reasons supporting their view that he is not fit to be President. Although I agree with Trump’s stance, on business (except trade), taxation, reduced regulations, and a few other areas, I think his character issues—narcissism, lack of teachability, general erratic behavior—will spook the market to conclude that he won’t be able to deliver his business-friendly agenda.
Business likes stability and predictability. Stock Markets hate uncertainty. Sadly, though he had some successes, Donald Trumps’ first few months in office has been chaotic. Although markets reacted enthusiastically to his pro business ideas at first, the steady stream of blunders, contradictions, and his disregard for the truth, is disconcerting. Eventually, it took a toll on the Dow on May 17. The Index closed down 370 points following reports about Trump’s handling of confidential information and comments he purportedly made to former FBI director Comey.
North America’s Anemic Economies
I believe we are in for a bumpy ride on North American Stock Markets. In Canada, tax and spend liberal Prime Minister Trudeau isn’t doing anything to create sustained conditions for firms to invest and create jobs. Ontario continues to waste taxpayers funds at an alarming rate and to discuss anti jobs policies. Meanwhile, Alberta’s economy isn’t going anywhere with its left leaning government, and British Columbia will likely have a minority government with a one issue party, Greens, holding the balance of power. Add to this mix, housing bubbles in Toronto and Vancouver and we have the perfect recipe for an anemic Canadian economy.
In the USA, what will Donald Trump do when he grows up? More specifically, will he grow up? I think David Brooks has a point. Trump is behaving like a child. Will he allow someone to help him do the job of President? Clearly, he isn’t capable of doing this job his way. But even scarier is this quote from a Time Magazine article on Trump: “One senior White House official recently outlined the three rules of Trump for a group of reporters: When you’re right, you fight. Controversy elevates message. And never apologize.” Wow! That’s how he ran his businesses into several bankruptcies. This is not the moral, ethical way to conduct business, government … or life!
That said, if you are like me with investments in the Stock Market, what should you do in these challenging and uncertain times? First, and most important, please understand that no expert, no analyst…nobody but God alone knows the future; never forget this as you read and listen to the “experts.” Further, this will pass, but the journey is likely to be painful.
Seven Things you Should not do now
Here are some thoughts about things you should not do and things you should do during this arcane period:
- Don’t panic.
- Don’t rush to diversify, to buy, or to sell. These actions might worsen your situation. You lose only when you sell, and you must compute that loss based on your cost, not on previous highs.
- Don’t make investment decisions affecting goals, plans, budgets, retirement, impulsively. Ensure you follow a reliable decision making process that considers effects of your actions.
- Don’t wait to recover your investment value if the fundamentals of the investment or your goals have changed; act on the results of your review.
- Don’t try to time the market recovery.
- Don’t follow generic investment advice. You are unique; take a deep breadth and learn where you are, and the effects on you of what’s happening.
- Don’t do what everyone is doing; typically they are selling when they should be buying and conversely.
Seven Things you Should do now
- Do seek direction from the Lord.
- Do review investment goals, plans, budgets, and ensure reasons for investing in each item remain valid. If needed, prayerfully and reflectively, revise your goals, plans, and budgets, and act accordingly.
- Do be patient.
- Do try to learn from what’s happening. If you borrowed to invest; you will have a problem—learn from this. If you had no investment goals and were day trading or trying to make money—learn from this and develop investment goals.
- Do see this period with potential to provide the best investment lessons for you.
- Do accept that if your approach is to buy-and-hold investments, a market crash is a great buying opportunity.
- Do understand that stocks have intrinsic values and short term market fluctuations do not affect long term values.
When will be the next recession? Nobody but God knows! However, while he remains president, Donald Trump’s behavior is likely to create volatility in the Stock Market. Still, we must understand that he is behaving the way he did during his career, which led to multiple bankruptcies. Followers of Messiah must recall that God is in control and requires us to pray for our leaders. Pray for Donald Trump. Pray too that God’s peace will prevail as the chaos intensifies in the short term. Remember, God alone knows the future.
Finally, let’s mull over Apostle Paul’s words in Romans 8:24-25 (ESV):
“For in this hope we were saved. Now hope that is seen is not hope. For who hopes for what he sees? But if we hope for what we do not see, we wait for it with patience.”
© 2017 Michel A Bell