In fact, “Presence” is the fourth “P” added to the three “P’s” that underpin COTE 100’s investment philosophy: Foresight, Prudence, and Patience. Over the years, we have concluded that it is better to maintain a fully invested portfolio rather than letting the percentage allocated to cash fluctuate based on our interpretation of stock market conditions.
That said, in the context of Donald Trump’s presidency, we are undoubtedly entering a period of extreme uncertainty and unpredictability, both for the global economy and for world politics and geopolitics.
In this context of hyper-unpredictability, wouldn’t it be wise to take preventive measures to prepare for Trump’s future actions?
The major problem is that it seems exceedingly difficult to predict what Trump will do during his term. We know he wants to impose tariffs on imported goods, but will he do so on all products or only on those deemed strategic? And if tariffs are applied, how high will they be? We also know he wants to reverse immigration trends in the United States. But what measures will he be able to implement in this regard?
It’s important to remember that such measures, as well as others that could be considered, would negatively impact many American companies and, consequently, the country’s economy. The lobbying pressure from various industries is likely to be particularly strong on the Trump administration. Moreover, the President of the United States cannot do everything he wants: he is accountable and faces checks and balances that could force him to make concessions.
A plausible scenario is that Trump will ultimately turn out to be more moderate than many experts anticipate.
In short, even though it seems evident that we are approaching rough seas, a long-term investor should not change the course of their portfolio. The captain of the ship can prepare for such conditions by checking the sails and readying the crew. He can also reduce sail, ensure all objects and equipment on board are securely fastened, and reinforce the ship’s watertightness. But he has no choice but to face the elements and hope to weather the storm without sustaining too much damage.
I would add that this captain can also rely on his experience: he has already faced other storms in his long career and knows he will respond appropriately when they arise. He knows what to do when the storm hits; all he needs to do now is mentally prepare to protect his ship and crew.
The coming months and years promise to be turbulent for the economy and the stock market. As for me, like the captain of a sailboat, I can only prepare for what may come. However, I know I can count on the solidity and versatility of my ship (my portfolio) and on my outstanding and experienced crew (the holdings in my portfolio and my investment team). From now on, I am ready to face the elements and adjust the course if I deem it necessary.
Philippe Le Blanc, CFA, MBA
Chief Investment Officer at COTE 100
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