Two in one year

For the second year in a row, there’s a war on, and both were the result of dramatic policy changes instigated by President Trump. Last year, it was the Trade War, and this year it’s the real thing.

In both cases, the first reaction for many market participants was to sell. We use the term “participants” because we don’t believe the sellers are investors. However, there are enough of them to drive prices down in a dramatic way.

For Dock Street portfolios, the war is just the most recent leg down. Since October of last year, our losses have been significant, primarily due to intense skepticism about how the AI revolution will affect technology companies. A skepticism we don’t share. 

But now, it’s all about the war in Iran. We are only certain about one thing regarding the war—it will end. How can we be so sure? There’s an election in seven months. Allowing the conflict to drag on into the summer will mean certain disaster for the President’s party. Self-preservation for the President and his ability to govern means a fairly quick end to this Trump War.

As for the stock market and our portfolios, the war is masking several positive factors. Consider the following:

• The United States is a net exporter of energy, both natural gas and oil. High oil prices are good for our trade deficit and the economy.
• The US economy continues to grow as the massive investment cycle continues, and consumer spending shows no signs of slowing.
• Profits reported for nearly all companies in the S&P 500 are at record highs and still growing.
• And profits reported by companies in Dock Street portfolios are even stronger.

So our assumption is that these factors will support stock prices once the war ends. We just don’t know how much pain remains for stockholders until that day comes.

One thing to remember, Dock Street employees own the same stocks that you do. We eat our own cooking.

Best regards,

Daniel A. Ogden