Reflections on a rollercoaster ten days.

April 15, 2025

What a week+. Before I get to the newsletter, some announcements:

For those of you in Vermont and New Hampshire, I will be on VPR Vermont Edition radio this coming Tuesday from noon to 1 PM, along with Moshe Lander, an economist at Concordia University in Montreal. We will be discussing the current situation, he from the macroeconomics side, and me from the investing side.

If you live anywhere near Montpelier, Vermont or Middlebury, Vermont, we now have new offices open in each town. The signs are under construction and are going up shortly. Montpelier's One Day In July office is above Capitol Grounds, and Middlebury's is right next to the main bridge.

Background

So you know the relative context, Bloomberg published this:

There are some bright spots. For one, United States citizens in the past 10 days may have gotten their biggest economics lesson in history. Next up is a good article if you want to understand tariffs. CATO is a free-market think tank in Washington DC that has for decades fought against tariffs, in part under the mantra of "people who trade goods don't trade bombs."

https://www.cato.org/publications/separating-tariff-facts-tariff-fictions

If you are interested in the legal proceedings, Simplified Stationers will likely be the case to follow. There is an army of legal support lining up behind this Pensacola business owner, initially from conservative groups but expectations are that this is going to be a bipartisan effort. More info here and here.

Generation X, of which I am a member, has lived its adult life bouncing from one crisis to the next. I have now invested through the dot-com crash, 9/11, the global financial crisis, Covid, and tariffs. A substantial amount of learning from the prior four crises is already embedded in client portfolios, as well as the structure and behavior of the firm. Each crisis adds new angles, which we are studying.

I am going to give you a few ways to look at this that are hopefully different from what you are reading online.

1. The first thing you have to do to be a great investor is box out your emotions. For example, it's hard to believe, but if you look at the 1-year total returns of the S&P 500, it is actually mid-single digit positive. In Vermont, when it's 40 degrees in late October, it feels much colder than 40 degrees in April. The direction from which you approach the point you are at matters to your outlook.

2. Related to #1, I am surprised how many investment advisory firms are already out reconfiguring portfolios and altering strategies. This is a terrible mistake and a sign of an inexperienced investor. If you don't have the plan designed correctly prior to these periods, and the confidence to stick with it, that's a problem. The news should not be driving your plan. This doesn't mean we don't tweak portfolios sometimes in these periods when clients come to us with specific concerns or anxieties.

3. The business situation is likely worse than the tariff chart above implies. This is due to the fact that it's not just the rapid price changes, but the fact that no one in the business world has any ability to plan at this point. So the reaction is to batten down the hatches, and this then spreads to consumers. The wild swings you see in the market reflect this uncertainty. (Remember that in theory market prices are just current values of future expected corporate profits. In reality: plus a lot of emotion thrown in.)

. On the bright side, people working in and running businesses are creative, and they have to survive. The U.S. economy is probably the most dynamic in the world and quickly everyone is trying to work around this self-imposed shock. So you have a large number of people working together to mitigate the situation. This includes a long list of powerful people, from different political parties, who are now unified on the same team. I have to say, that feels good.

5. A positive takeaway educationally from this will be that people realize that good markets are made up of transactions between consenting parties, with both parties willing to the arrangement. When a third party interferes, as in the case of a central-planning tariff, things go sub-optimal fast. You can apply this thinking to a lot of scenarios in economics, business, government, and life.

6. 22 years ago Warren Buffett proposed the idea of a market-based internal credit system that would smoothly reduce the trade deficit, likely without conflict. https://fortune.com/2016/04/29/warren-buffett-foreign-trade/

Finally, I could have included graphs here showing all of the crises over the past century in the stock market, and how well everything worked out, but I'm not sure that's helpful when you are in the moment. More helpful is trying to reduce news consumption. You will feel a lot better putting hard limits in place; we have a group of clients who have worked at this and been successful. Just try to redirect your thoughts and energies to local projects, your garden, helping someone, playing golf actually on the fairway, getting better at your job. Things you can control.

For my son's confirmation, his sponsor (who happens to be a client here), gave him a plaque that says "You are what you think about." We keep that plaque next to our kitchen table. Keep that in mind when you feel tempted to read more news.

Dan Cunningham

1. S&P 500 total return source: Stockcharts 4/10/24 - 4/10/25: 3.5%
2. Graph source: Bloomberg: 4/10/25