The U.S. stock market has treated its investors wonderfully in the last few decades. It’s widely deemed as a profitable, if not the most profitable, market to invest long term. Buy and hold. Buy the dips. Buy the dip of dip of the dip of the dip. It will go up eventually.
The U.S. stock market has also rewarded me personally considerably. I’m able to work part-time comfortably because of it.
However, the investing environment has changed. The return of Trump brought fresh uncertainties. The U.S. market was already at a high valuation. I’d been thinking about moving out of the U.S. market and USD since at least the beginning of the year. I did not. It would’ve been a great decision but I did evaluate the situation carefully before making the decision to stay. Decisions can often look foolish when we look back with more information. Based on the information that I had, I still think staying was the right decision. I still believed in the U.S. stock market in the long term. I believed the current corrupt, incompetent, idiotic, belligerent administration wouldn’t do fundamental damage to the U.S. stock market. I, like many other people, thought Trump at least wouldn’t be bad for the stock market. I was also hesitant to leave a market that had benefitted me immensely. I believed that there would always be opportunities in the U.S. stock market, even if it enters a downturn. And how crazy can this administration get? Would it willingly damage its own economy? That was January.
This is April and a lot has happened since then. The crypto scams by the president himself, the increased threat on Canada, the launch of a ridiculous tariff war, the ever increasing open corruption, insider trading, pump and dump… not to mention what’s happening politically inside the U.S.. It makes one wonder, is this time different? Should one still invest in the U.S. stock market?
It’s not like the U.S. stock market hasn’t been through turmoils before. Just to name a few recent ones, the tech bubble burst in early 2000s, the Great Financial Crisis, the 2020 Covid crash, the 2022 tech crash. They all recovered. Some took much longer than others but eventually recover they did. The last two crashes recovered so quickly that it affirmed many’s belief in “always buy the dips”. Is this time different?
I think it is different. This time the U.S. has done too much damage to its international relations, and it has lost too much trust. I hesitate to call it “irreversible” because it can be reversed, but it will undoubtably take many years. The open corruption from the government is also something new. Insider trading no longer seems like a big deal under the current administration. People around the world weren’t actively boycotting U.S. products and refusing to travel to the U.S. before. Many think the U.S. can withstand the current administration. The problem, however, goes deeper. Trump was elected by the American people, twice. His views are shared by many Americans. The divided society won’t disappear after this administration. The opinions and ideas expressed by this administration won’t disappear. The next administration could become friendly once again and more importantly, competent, but what about the one after that?
The reversal of Trump’s tariff in recent days might further affirm dip buyers’ belief. It’s still early to tell whether they are right or wrong. My opinion is that their belief is misplaced. I have little faith in the current administration. Worse still, I’m losing faith in the U.S. stock market itself when blatant market manipulation and insider trading are ignored. It’s not a market I want to be in.
Now that I have a lot more information than in January, I’m updating my investing strategy as well: diversification. Having most of my net worth in the U.S. stock market was never smart in the first place. In the past few weeks, the market has taken a toll on my moods and sleep. It’s never too late to do the right thing: I’m diversifying into the Swiss and EU market. At this point of my investing journey, I’d rather not deal with the unnecessary huge swings induced by moronic policies. I hedged my positions in the last few weeks and got decent results. Yet it’s exhausting. I’d rather spend my time doing other things that I enjoy, like watching Tintin in French. All that said, I’m not leaving the U.S. stock market entirely either. The long term goal is that U.S. related assets will only take up less than 1/4 of my net worth. Why do I still choose to partially stay in the U.S. market then? The reason is that the most likely outcome of all this is that U.S. stock market will no longer outperform, that it will lose the premiums it only had, but it will still exist and it’s still a place to be in. The contraction I expressed here (“not a market I want to be in” and “still a place to be in”) is due to my belief in diversifying. We may have strong convictions but still we still don’t know what exactly is going to happen. Having 1/4 invested in the most powerful nation in the world is the sensible thing to do right now, even if it again turns out to be a bad decision when looking back in the future.
I’m not rushing to moving out of the U.S. market yet preciously because of the dip buyers, the ones who still have great faith in the U.S. market. Thanks to them, I’ll have amble time to make my move. I do hope their faith will be rewarded. No one deserves to lose their hard earned money because of other idiots.