Getting Back on Track
Waiting for Donald Trump to be sworn into the actual presidency seems to be the most difficult wait in history. President Biden’s administration is spending freely, driven by the hope of “derailing” the new administration’s organization plans. I can’t remember such obvious actions of ill-intended means by any outgoing administration, but this time it may be more understandable as there is a significant number of Americans who simply dislike Donald Trump. Their political view has been relegated to the minority by the broad-based election results, which makes the transition even more difficult. Nevertheless, we look forward to the “change” coming around the corner.
The macro-economic picture shows an environment coming off a periodic tightening and having come through an election where knowing the truth was difficult. After all, polls showed Kamala within a 1% margin of victory on the actual day of voting. They also depicted her winning outright key states. (Neither of which occurred.) The election proved to be a one-sided victory, one that was much different than the table setting going into the election. Looking back, it was a rather comfortable victory, but the information certainly did not hint of it.
Looking forward from here, we see flashes of sensibility, but in the real world what do we really see? We seem to be moving on the Panama Canal and Greenland, but this is not the focus we need. Instead, we need the big picture of what Trump plans to do. I believe that the focus will be fair trade, supported with a tariff or two to assure the outcome. The real crux of the Trump plan is budgetary. This is where the excitement lies.
Our annual American budget has been linked since World War II, with each administration adding their pet program, or project, to it. The budget has grown with all these linkages, and we now sit on a deficit of a trillion dollars or so. Obviously, with such a deficit, taxes must seemingly be increased. This time, for the first time, I believe Trump will attempt to eliminate budgetary excess by simply eliminating unnecessary programs and departments that have been added senselessly to the cost of government.
Likewise, if the Trump administration could eliminate the many regulations, charges, and fees that have been inserted by the Biden administration, we could be heading into a budget surplus. Profits would expand and markets would go higher.
This isn’t a done deal, but the odds seem good that we could be headed into such an environment. One featuring higher profitability, fewer constraints, and an attitude for taking risks and achieving results. None of this is yet in place, but we will shortly know the score of how many initial cabinet “picks” are approved for the final cabinet. We have a distinct feeling that the majority will pass screening. We can anticipate more departmental direction and discipline with each selection.
We know that the Trump administration wants more border discipline, a more efficient and decisive defense establishment, less regulation and freeing up of petroleum reserves, and more incentives built
into the economic structure. We expect to see this take place incrementally with each appointed cabinet member.
The transition will be objected to by many who have been vested in the Democrat-led government over the last few decades so our strategy will be to increase our investment with each successful step in the process.
Our investments will be in high-quality companies that are leaders in their respective sectors. We simply want to own the best, most well-financed corporate leaders. Companies like this will increase market share and be more valuable after the next market leg.
We expect this high-growth environment to be the end result of all the changes we will be witnessing. It will take patience to audit these changes as they take place. Perhaps not all these changes will succeed as planned, but the effect of those changes that do will likely be meaningful. Cutting back on changes, taxes, and regulations that have been inserted by the Biden administration, should give us another growth spurt. After all, less government and more freedom is a good recipe for a higher market and higher profits.
We already own several of the leaders we expect to emerge if this growth environment takes hold. We expect to add to our existing positions in Costco, Intuitive Surgical, Microsoft, Home Depot, and Hubbell. We are also looking for new names to add to the portfolio. All holdings will be leaders in their particular niche with impeccable balance sheets and an outstanding operating record. A portfolio of leaders like these will add value to your wealth picture.
You can be sure that we will monitor the next few months very carefully to assure that our big picture worksheet evolves as we expect. This is far from a guarantee, but we like our picture as we see it today.
Our best wishes for a prosperous and healthy 2025.
