“Davidson” submits:
Wall Street likes to think that markets are predictable, but understanding investment cycles are much closer to a work-in-progress. Every cycle is unique differing from the last with the basis that we incorporate all we have learned up to that point in time to anticipate the next move forward. The accumulation of knowledge about ourselves should teach us that we never see the future well except that their will be unexpected innovations and geopolitical events to which we must adjust. Some innovation is spectacular like the iPhone while others accrue in importance over decades. This Youtube clip about the construction of the computers which let us land men on the moon in the 1960’s shows just how far the 1960s differ from today, yet we routinely compare historical financials to predict our future when the points of reference on which those markets were based have changed so much to render comparison meaningless.
This cycle with Trump’s initiatives towards righting-a-ship that had gradually listed the last ~40yrs to far to one side, the media finds every shift away from known comparisons terrifying and say so everyday and all day. It becomes clearer if one can develop historical perspective and think in terms of decades not quarter-over-quarter. Part of this perspective requires an appreciation of our efforts at self governance over centuries and identify why the US has been so successful vs other countries. The reason for our success falls squarely on our protections to individual property rights as written into the US Constitution. Ultimate decision making in the US resides in the collective opinions of individuals each having identical rights to free speech and to intellectual and physical property. The US does not have sovereign leadership. It is in the current effort of regaining full protections of US individual property rights that eroded the past ~40yrs as US global trade expanded with less innovative governments. US leadership increasingly gave concessions to facilitate trade on the basis that the US being far wealthier could afford to be generous. The US accepted high tariff barriers to exports in return for market expansion. China in particular, but Europe and others as well, took advantage of this situation to the detriment of US society. Not only did the US ‘give-away’ a portion of its productive capacity, the US expanded its military budget to foster Democracy and protect individual rights globally incurring significant expense. History shows us that the breaking point began in the 1980s when US manufacturing employment began its long term decline. The recent tariff initiatives to right a long established imbalance is new territory for all of us and creates uncertainty.
China is the current poster child having been overt in its actions to abuse trade relationships. The eventual goal is to eliminate all tariffs globally and place every government on the same level playing field. The process of getting to this point means the US must withstand many slings and arrows even from internal critics who see their individual long-held positions losing importance. Regaining individual property protections for US innovators which had deteriorated with global trade expansion and fostering the same for all global innovators should prove a great benefit. Success will raise US productivity, lower US military costs, lower global inflation and foster Democratic societies globally. Success in this effort will raise global standards of living at a more rapid pace than we have ever experienced.