Tariffs, protectionism and an America First mentality that does more harm than good. But what does this have to do with your finances? Quite a lot. Trump's economic policy is a good example of why you shouldn't just rely on the USA as an investment location and why ego in politics can cost you your investment returns in the long term.
Tariffs: expensive, pointless, harmful
One of Trump's favorite tools was (and is) the tariff stick. Whether against China, Europe or Mexico. Trump believes that higher tariffs will protect American jobs and strengthen the domestic economy. In reality, however, these measures have had one main effect: rising prices for consumers, growing uncertainty for companies, the stock market and declining competitiveness.
Example: The punitive tariffs on Chinese products have forced many US companies to either accept higher purchase prices or make expensive changes to their supply chains. Consumers and investors ultimately pay the price when company profits come under pressure.
His ego: above all else
Trump's actions are not economically rational, but impulsive and egocentric. Decisions are often made on instinct or, worse still, to nurture his own ego. Economic logic or long-term planning? Probably not the case.
The problem: the markets don't like uncertainty. If one man introduces tariffs, terminates contracts or strains trade relations out of spite or a desire to make a name for himself, this becomes a political risk, one that can have a direct impact on your portfolio.
Conclusion: Why you shouldn't just bet on the USA
Although the USA is an important business location with many innovative companies, it is not the world. Anyone who invests their money exclusively in US equities or in a pure S&P 500 ETF is taking a cluster risk, both politically and economically. Trump's time in office has impressively demonstrated how quickly an environment that is considered safe can turn into a highly dangerous playground for political arbitrariness.
My tip: World ETF, Bitcoin and/or gold instead of ego roulette and cluster risk
In the long term, you are best off with a globally diversified ETFfor example on the MSCI World $IWDC (+0.49%) or FTSE All-World $VWRL (+0.35%)
$FWRG (+0.47%) . This spreads your risk across many countries and sectors and makes you less dependent on whether a single president is in a good or bad mood. If you want other assets, I recommend a manageable share of Bitcoin $BTC (-0.06%) and/or gold $ZGLD!
Trump shows how irrational politics can be. Your investment should be exactly the opposite: rational, broadly diversified and long-term oriented.
Bottom line: Trump stinks - economically speaking (perhaps literally). His tariffs do more harm than good and his ego is a ticking time bomb for the markets. If you invest wisely, you won't be rattled by this, but will focus on the whole world instead of a single political uncertainty factor.
What is your opinion on this? What do you do with your portfolio in times like these?
Your Lord Vader!
