Trumponomics and the Stoa

 In a cooperation with Business Insider Magazine “Learning from the super-rich”, BeeWyzer is contributing articles and webinars since January 2025 in order to contribute lessons from managing big wealth to a broader public. In the end, an increase in wealth and investable assets is a driver of economic growth and beneficial for everybody. We are happy to share the articles in our blog also – feel free to skip if you are an expert already and enjoy the read if they offer valuable knowledge to you!

TRUMONOMICS AND THE STOA

By Christian Stadermann and Peter Brock, BeeWyzer GmbH

Let's be completely honest: after the good stock market performance of recent years, nobody expected the party to continue in 2025.

But the shocks, which the erratic signals from the new US administration regularly send out to the global economy and the financial markets, probably exceed the level of uncertainty that most had expected.

After four months, it is therefore time to pause and look for new patterns and correlations for investors in order to tackle this new world order.

Let's start with a look at political maneuvers and their reflections on the global economy and financial markets:

• Statements that pull the market down today may be obsolete tomorrow. As an investor without insider information, I should therefore not allow myself to be influenced by this: The probability of losing money with hectic moves is much greater than any chance of an improvement of my performance. This makes a clear investment strategy and consistent action all the more important.
• The bond market and inflation, which matters most for Trump voters, are the only triggers - apart from media attention - that seem to influence the US president more than his advisors do. If he fails on these two fronts, the only thing left to do is to change the the only options left are a change of policy or a more authoritarian form of government. In the first case, we partially return to the old normality; in the second case, a civil war could throw the USA out of its global leadership role for good. That sounds a bit extreme, but experienced political experts do no longer rule out such a dramatic shift.
• Global trade will look for new routes and channels after a phase of shrinking GDP if the current political line is consistently enforced.
• The rise of China to technological leadership and thus to the most important superpower will presumably be facilitated and accelerated in this way. The Shanghai Auto Show has again clearly demonstrated this, but a similar trend is developing in many sectors.
• As a major consumer market, Europe has every chance of surviving the challenges well because anyone who wants to sell something here must also accept our exports: In relation with the USA, the dependencies are reciprocal, the EU is a very important market for US BigTech, the armaments efforts of the Europeans can boost research and economic growth, while a possible brain drain in the USA if political tensions intensify is likely to benefit Europe in particular.
• The old German stock market wisdom ‘political stock markets have short legs’, which should be understood as an appeal not to overestimate the impact of politics on the real economy and financial markets.
• In any case, however, every private investor - just like the super-rich – should devise a personal strategy for dealing with the increasing volatility of financial markets.

When Zeno of Kition founded the Stoic school of thought in Athens around 300 years before Christ, the attention-seeking and erratic Trumponomics and their disciples, the Trumpoholics, who are so much in the spotlight today, did not yet exist. However, with his attitude of seeking a universal principle in all natural phenomena and contexts of life and striving for peace of mind and wisdom with serenity, he would be well positioned as an investor for today.

In his spirit, we would like to put out a few recommendations here:

• Don't let any hustle and bustle get to you!
  As we said at the beginning: without insider knowledge, you will usually lose with quick transactions.
• Do not enter in radical action!
  Selling all shares or only holding gold does not only contradict the risk diversification approach of modern portfolio theory. It also assumes superior knowledge in one's own assessment and this is a kind of hybris that almost always comes before the bust.
• Think about inflation and its consequences!
  Even if price rises are currently a major issue in the USA, while in Europe the signs are pointing more towards easing, we cannot relax. The interdependencies in the movement of goods, services and capital are too great. Over a longer phase of higher inflation in the USA it will have an impact over here, too. Real assets and inflation-protected bonds securities should therefore be increased over time. And when investing in companies, attention must be paid to low fixed capital, short production cycles and pricing power.
• Look for alternatives!
  Anyone who has never looked at private equity and other forms of alternative investments could do so now: The high volatility in the liquid markets is likely to stay with us for a while and the illiquidity premiums of ‘alternatives’ at reduced vola will become more attractive.
• Additional income!
  If you have experience with options, you can profit from high vola by selling covered call options or put options on attractive stocks.
• Question the existing allocation!
  Anyone who is not invested with an investment horizon of 10 years plus should critically scrutinize risk positioning and investment mix and adapt them to a relevant personal time horizon.
• Do not look at unadjusted figures!
  Neither the nominal return before costs and inflation gives investors the right orientation, nor global equity investments before exchange rate effects. US policy is deliberately aimed at weakening the external value of the dollar, meaning that European investors in the US market are currently suffering twice. A turnaround in US policy could very quickly bring about a reversal through the repatriation of American investment funds, which have flowed massively abroad this year.
  The rise in the price of gold also very much reflects purchases by central banks that want to diversify out of the dollar. Cryptocurrencies are also an alternative, but could soon become a political gambling tool of Trumponomics and you have to be able and willing to bear such a risk.

Our recommendations are actually simple and can be applied to all crucial situations in life:

No emotional frenzy, use logical thinking, implement the measures you identify as effective quickly and in the right measure. Or in the words of the Roman philosopher Seneca, who was one of the most famous Stoics:

If a sailor does not know the shore he is heading for, no wind is a good one.