45 & done

45 turned out better than many suspected. They thought Donald Trump would have a hard time lasting a year, let alone two. But in that time US unemployment hit a 50-year low and is considered full employment. The stock market went up 60%. Taxes went down 30%. The economy grew robustly. Corporate profits thundered higher. At times he actually looked presidential.

So it’s hard to tell exactly when the moment was that it all went to dog poo. Maybe it’s the admission he had tawdry affairs (with sleazy women) that he previously denied. And paid them. Or when he called Rex Tillerson, a monumental man and his former secretary of state, “dumb as a rock.” Or when his his lawyer, campaign manager and national security advisor were indicted for criminal acts. Maybe it when he thwarted the global climate change conference a day or two ago weeks after California burned, or refused to recognize that migrants are people with rights. Just like billionaires. Perhaps it was the crushing defeat in the midterm elections. Or having China’s greatest female businessperson arrested and shackled. Or when it became evident what’s coming, which could include impeachment.

Beats me. I am but a distant observer. But I’m also a financial dude. And Trump is now giving the markets more to worry about than he did to pump them up.

Trade wars, especially with China, are high on the list of anxieties. Tariffs may have brought a few more jobs to Toledo, but they’ve mercilessly increased the cost of doing business in America. GM alone is spending $1.4 billion more for stuff like steel. (And look what it just did.) The modern US economy has been built on free trade. Protectionism and nationalism are ancient, discredited concepts leading to isolation, xenophobia and reduced growth. Markets hate all that.

But the main Trump worry now is how to unwind this presidency.

Yes, he can be impeached and it looks like the Democratic-controlled House will try that. But unless Trump completely ticks off his Republican base in the Senate, the process will fail. Nonetheless, a move to dump him will stir strong passion, increase the nation’s divide and weaken the States on a world stage where it’s already seen as unreliable, quixotic and retrograde as its leader.

The Mueller investigation could uncover enough new crap that running for a second term of office in 2020 is impossible. His party will not endorse him. He’s toast. Or, Donald Trump can continue to campaign as he has for two years, go into an election year and – if the midterms were any indication – lose the contest. Victory seems off the table, unless the opposition hauls out Hilary Clinton again. (Perish the thought.)

In all of these scenarios, Trump will not go quietly, professionally or gentlemanly. He is no loser, ungracious in defeat and incapable of admitting a reversal. It’s his very core and essence to be combative and victorious. And tens of millions of people hoist him on their shoulders as the iconoclastic champion of their expectations. Will Mr. Trump call the next election rigged, claim millions of illegal and dead people voted against him, and refuse to leave office? Will his supporters, many of them well-equipped with weapons and F150s, challenge any anti-Trump outcome? What leader is there who can emerge and bridge this divide between left and right?

This year coming, 2019, is the third one of the Trump presidency. Typically this phase of the presidential cycle is the strongest for financial markets. If the Fed backs off on rate hikes, corporations keep making piles of dough and full employment continues, then investors can do well. But being overweight America is probably a bad idea.

However, the year coming also promises turmoil. Trump has no chief of staff. Mueller is nipping at his jugular. In Europe Macron is French toast after having dome the wrong thing (never give in to trolls or thugs), Merkel is heading for the exit and Brexit is soon to be Brokeit. Russia and China, crafty and playing the long game, are happy to increase their global influence as Trump flounders, alienates allies, fights with everybody and heads for inevitable oblivion.

As stated, the 45th president – an improbable, inexperienced egomaniac – did some good. He rattled cages, shook the established order, turned the chair upside down and brought populism to high office instead of letting it burn down the streets as is happening in France. The night he was elected stocks crashed in fear then surged in anticipation that this guy would do crazy things to goose the economy. And he did. Now the hangover. Everybody wonders how it can end well.

What to do?

Be aggressively conservative. Stay invested with balance and a broad diversification of assets. You have no idea how this will play out, and the best path through the chaos is the same one that led through the 2008 disaster, the 2011 debt ceiling crisis, the 2015 oil crash and the 2018 trade wars. The economic fundamentals are sound. The world is expanding. Companies are prospering.

Ignore the noise. And expect a lot.