Surviving the Trump Presidency: An Investor’s Guide to Navigating Chaos

This was written in November 2019.  The observations that follow reflect the market environment of that period.  They are reproduced here because the analysis remains instructive — and because Donald John Trump has returned to the White House, which means the question of how to invest through a Trump presidency is no longer historical.  It is current.

The Fundamental Problem

Markets dislike uncertainty.  They can price risk.  They cannot price the unknown.  The challenge of a Trump presidency is not that it is uniformly bad for markets — the data does not support that conclusion.  The challenge is that it is unpredictable in a category that markets have no established mechanism for pricing: presidential behaviour.  Previous American presidents — regardless of political affiliation — operated within a broadly consistent framework of institutional constraint, diplomatic convention, and self-interested calculation that made their actions, if not always popular, at least foreseeable.  You could model a Reagan presidency.  You could model a Clinton presidency.  You could model a George W. Bush presidency with reasonable confidence about the range of possible outcomes.

A Trump presidency operates on different principles.  The decision-making framework is personalised rather than institutional.  Policy positions announced on social media at 3 in the morning have the same legal weight as positions developed through the conventional interagency process over months.  Trade wars are initiated and paused on the basis of negotiating dynamics that are opaque to the market until they are not.  Alliances that were considered foundational to the post-war international order are renegotiated or abandoned without notice.  The market, which had priced in decades of institutional continuity, had to reprice for a presidency that treated every established convention as a starting position for negotiation rather than a structural constraint.

What the Market Actually Did

The narrative that a Trump presidency would be an economic catastrophe was wrong.  The S&P 500 rose approximately 70% from Trump’s election in November 2016 to the pre-COVID peak in February 2020.  Corporate tax cuts from the Tax Cuts and Jobs Act of 2017, reducing the federal corporate tax rate from 35% to 21%, provided an immediate earnings boost to US-listed companies that the market priced in enthusiastically.  Deregulation across financial services, energy, and environmental sectors removed compliance costs and opened revenue opportunities that added further to corporate earnings.

The investor who concluded in November 2016 that a Trump presidency meant market catastrophe and exited equities was wrong.  The investor who concluded that specific sectors — defence, energy, domestic manufacturing, financials — would benefit disproportionately from the specific policy directions Trump had articulated during the campaign, and positioned accordingly, did very well.

This is the essential lesson of investing through political volatility: the question is not whether the politician is good or bad in the abstract.  The question is what specific policies they will enact, which sectors those policies benefit, which sectors they harm, and how to position accordingly.

The Volatility Premium

The Trump presidency introduced a specific category of risk that requires a specific response: tweet risk.  A single social media post could move individual stocks, entire sectors, or foreign currency markets within minutes.  Boeing’s stock moved on comments about Air Force One contract costs.  Pharmaceutical stocks moved on comments about drug pricing.  The entire Chinese equity market moved on tariff announcements.  Agricultural commodity futures moved on trade war developments.  The speed and unpredictability of these movements made conventional risk management — which assumes that major market-moving information arrives through established channels with some preparation time — structurally inadequate.

The investor’s response to tweet risk is not to predict the tweets.  Nobody can.  The response is to position in assets whose fundamental value is sufficiently robust to absorb the volatility without requiring precise timing.  Quality assets — companies with strong balance sheets, genuine competitive advantages, earnings that do not depend on favourable government policy — absorb political volatility better than leveraged, policy-dependent, or speculative positions.  The investor who holds a leveraged position in a sector specifically targeted by presidential commentary discovers, rapidly and expensively, that leverage amplifies tweet risk in both directions.

The Trade War Dimension

The most significant sustained market-moving development of the first Trump presidency was the trade conflict with China.  Tariffs escalated from a specific list of steel and aluminium in early 2018 to a broad application across hundreds of billions of dollars of Chinese goods by late 2018, producing direct impacts on US corporate supply chains, input costs, and the earnings of companies with significant China exposure.

The market’s initial response — a sharp sell-off in affected sectors — was partially reversed as it became apparent that the trade war, while genuine, was also a negotiating mechanism rather than a permanent restructuring of US-China trade relations.  The Phase One trade deal signed in January 2020 did not resolve the fundamental tensions but provided enough de-escalation to calm markets that had been pricing in continued escalation.

For the investor, the trade war created specific opportunities.  Companies whose supply chains were concentrated in China faced genuine margin pressure.  Companies that had diversified supply chains — or that could benefit from the redirection of manufacturing to Vietnam, Indonesia, Malaysia, and other Southeast Asian economies — saw competitive advantages improve.  The investor who identified this structural shift early and positioned in the beneficiary economies captured a specific and durable tailwind.

Singapore, as a major trade hub and financial centre, was particularly well placed to benefit from this redirection.  Capital and manufacturing activity seeking alternatives to China passed through Singapore’s financial and logistics infrastructure.  The STI underperformed the S&P 500 over the period, but specific Singapore-listed companies with Southeast Asian supply chain exposure outperformed the broader index.

The Dollar and the Interest Rate Environment

Trump’s relationship with the Federal Reserve was openly antagonistic — he repeatedly and publicly pressured Fed Chairman Jerome Hayden Powell to cut rates, criticising the Federal Reserve’s independence in terms that previous presidents had scrupulously avoided.  The Federal Reserve, to its credit, maintained its independence in practice even while enduring the public commentary.

The rate environment during the first Trump presidency moved from a tightening cycle in 2018 — which contributed to the December 2018 market correction, the worst December performance since 1931 — to a pivot toward cuts in 2019 as growth concerns mounted.  The three rate cuts in the second half of 2019 provided the liquidity support that helped markets recover and advance into 2020 before COVID arrived and changed every assumption simultaneously.

For the fixed income investor, the rate environment required continuous reassessment.  The investor who positioned for continued rate rises in 2019 on the basis of 2018's trajectory was wrong by the second half of the year.  Central bank policy under political pressure — explicit or implicit — does not always follow the trajectory that economic fundamentals alone would suggest.

The Sectors That Won

Three sectors outperformed consistently through the first Trump presidency and would likely do so again under similar policy conditions.

Defence was the clearest beneficiary.  Trump’s commitment to NATO allies paying more for their own defence, his expansion of US defence spending, and his general approach to geopolitics as a competitive rather than cooperative domain created sustained demand for defence equipment and services.  Lockheed Martin, Raytheon, and Boeing's defence division all performed strongly.

Energy benefitted from systematic deregulation.  The withdrawal from the Paris Agreement, the expansion of offshore drilling licences, the approval of pipeline projects that had been blocked by the previous administration, and the general policy orientation toward fossil fuel production over renewable transition all provided commercial support for the energy sector.

Domestic manufacturing and industrials benefitted from the combination of corporate tax cuts, infrastructure spending rhetoric — which was more rhetoric than action in the first term but supported sentiment — and tariffs that increased the relative cost of imported goods and improved the competitive position of domestic producers.

The Sectors That Did Not

Renewable energy underperformed the market consistently as the policy environment shifted away from the incentive frameworks that had driven its growth under the previous administration.

Multinational consumer goods companies with significant China exposure — including major brands in apparel, electronics, and retail — faced sustained margin pressure from supply chain disruption and tariff costs that could not always be passed to consumers.

Healthcare was volatile throughout — Trump’s commentary on drug pricing created specific downside risk for pharmaceutical companies, though the sector’s fundamental demand drivers meant the underperformance was contained rather than catastrophic.

The Investment Principles That Apply

Several principles apply to investing through any Trump presidency — and, more broadly, through any period of elevated political volatility.

Position in quality.  Companies with strong balance sheets, genuine competitive advantages, and diversified revenue streams absorb political volatility better than leveraged, concentrated, or policy-dependent positions.  The volatility creates opportunities to acquire quality at temporarily depressed prices.  The investor with cash reserves and discipline to deploy them during the sell-offs that tweet risk produces is structurally advantaged.

Diversify geographically.  A Trump presidency affects the US market most directly, but its effects ripple through global trade, currency markets, and diplomatic relationships in ways that create both risks and opportunities in non-US markets.  The Southeast Asian economies that benefit from supply chain redirection, the Asian financial centres that attract capital seeking alternatives to US-denominated assets, and the commodity-exporting economies that benefit from infrastructure spending and defence procurement — all of these provide portfolio diversification that reduces the concentration of tweet risk in any single position.

Maintain liquidity.  The sell-offs that political volatility produces are buying opportunities for the investor who has cash to deploy.  The investor who is fully invested at the beginning of a volatile period has no capacity to take advantage of the dislocations the volatility creates.  A higher-than-average cash balance is not a failure of conviction.  It is an option on future opportunity.

Ignore the noise.  The 24-hour news cycle during a Trump presidency produces a continuous stream of commentary, outrage, analysis, and counter-analysis that creates the impression of constant crisis.  Most of it is irrelevant to long-term investment value.  The investor who makes decisions based on the tone of the morning’s news coverage is making decisions on the wrong variable.  The investor who makes decisions based on fundamental valuation, earnings trajectory, and the structural impact of durable policy changes is making decisions on the right ones.

The Conclusion

A Trump presidency is navigable.  It is not predictable in the conventional sense.  It is volatile in ways that create both risk and opportunity.  The investor who positions defensively, maintains quality, diversifies geographically, holds liquidity, and ignores the noise will find that the volatility creates more opportunity than it destroys — provided the fundamental discipline of long-term thinking is maintained through the periods when short-term noise makes that discipline most difficult.  The market survived the first Trump presidency.  It will survive the second.  The question, as always, is not survival.  It is positioning.

---

Terence Nunis | Executive Chairman, Equinox Zenith | Author, The 1% Playbook: The Billionaire Cheat Code