Ramstad: Investors are betting they will control Trump’s worst tendencies

Political commentators marveled at Donald Trump voters who said he wouldn’t as president do things he talked so much about in the campaign, like deporting millions of unauthorized immigrants and imposing so many tariffs that inflation reignites.

Investors are making the same bet as those voters, the performance of the stock market since Nov. 5 shows us. And so are the members of the Minnesota Star Tribune Investors Roundtable, who made the most bullish predictions for the upcoming year that I’ve seen in the 11 years I’ve sat in on the discussion.

And when I think about it, I’m also making that bet.

I’m nervous about it, though. I’ll soon enter my 60s, and the next few years of economic and market performance will have a huge influence on the size of my investment portfolio and the income I can expect in retirement.

On principle, I’d hate for the U.S. economy to tumble into recession. I’d really be upset if it happened because Trump created more labor scarcity with deportations and raised the cost of goods with tariffs. Inflation would return, interest rates would rise and a vicious spiral of effects would ripple through real estate, consumer spending and investments.

Selfishly, that would damage my retirement savings, and then it would take time to recover. And time is more valuable to me the closer I get to retirement age.

However, I confess I’ve done little about this anxiety except to research TIPS, or Treasury Inflation-Protected Securities, as a potential hedge. The Wall Street Journal’s personal finance sage Jason Zweig wrote a terrific post-election article about them. His colleague James Mackintosh later wrote why all the bullishness is making him anxious.

My inaction is partly because I’m a conservative, dollar-cost-averaging investor rather than a market-timer. Partly it’s because I believe, as I have said often in this column, political leaders have less effect on the economy than businesses do, contrary to what a lot of people think.

Partly it’s because of the reasons I heard at the Star Tribune’s Investors Roundtable, which took place Dec. 9. Participants noted Trump measures himself above all by stock market performance; his hands-off approach to antitrust will trigger a deal wave; the nation’s need for workers will force him and Congress to resolve the immigration dilemma; and the AI and quantum computing phenomena present a growth opportunity similar to the 1990s internet boom.

“Think about fresh fruits and vegetables, something like 40% of the workforce is immigrant-born,” said Carol Schleif, chief market strategist for BMO Private Wealth. “That’s why the farm entities are all up in arms that, if you want to see an immediate impact on inflation, deport all those workers.”

Roger Sit, chief executive officer of Sit Investment Associates, added: “Just remember how President Trump won. A lot of the swing voters were farmers, Latinos, blue-collar workers. He knows he’s got to keep jobs around.”

I hope he knows. During the campaign, Trump and running mate JD Vance seemed stuck in the 1980s by portraying the country as overrun by unauthorized immigrants stealing the jobs of hardworking Americans.

While the flow of immigrants across the southern border appeared out of control in 2022 and 2023, it didn’t create the same competition for jobs seen in the 1980s and 1990s. Back then, the nation’s domestic population was expanding faster. Today, the workforce is shaped by the exit of retiring baby boomers and entry of fewer young adults because births have declined since 2007.

Employers are responding by investing more in productivity-enhancing technologies. “The labor shortages of the last four or five years really forced the acceleration of technology,” Schleif said.

She and other participants in this year’s roundtable discussion said there’s a solid chance the U.S. is in the middle of a stock market run like the second half of the 1990s, when the S&P 500 had five straight years of returns at 20% or greater.

“Technological innovation is very similar to the 1990s, when the internet infrastructure was being built,” said Ben Marks, chief executive of Marks Group Wealth Management. “Now, we’re seeing the next generation of that with the AI infrastructure.”

Valuations of U.S. tech companies today remain below where they were when the 1990s bull market ended with the “tech bubble.” The price-to-earnings ratio for U.S. tech firms in late 1999 and 2000 was around 50. It reached 41 in August and is back in the high 30s today.

If Trump turns out to care about the stock market above all else, he’ll want to do better than in his first term when the Dow Jones Industrial Average rose just over 50%. That’s slightly more than it has under President Joe Biden.

The last Republican two-term president, George W. Bush, left the White House with the Dow in negative territory, owing to the global financial crisis in 2008. Ronald Reagan and Barack Obama over their two terms saw the Dow rise about 150%.

If Trump really wants to be the best, he’ll have to beat Bill Clinton, who was president during that 1990s market run. The Dow more than tripled during Clinton’s two terms.