If there is one throughline that could connect the thematic arc of national politics over the past 15 years, it is this: Congress ceding ever greater control of their constitutional powers to the Executive branch while, at the same time, each successive administration flexing its muscles by testing the limits of presidential authority in increasingly creative and aggressive ways. This is evidenced by the new presidential rite of passage – a slew of “day one” executive orders implementing expansive shifts in public policy, frequently aimed at reversing the priorities of an immediate predecessor. Instead of deliberative, collaborative governance producing sustainable solutions to the problems of the day, we get a whipsaw of policy directives that breed uncertainty and deadweight loss.
Costly regulatory overreach. Tax carve-outs and loopholes. Top-down economic mismanagement by the government (i.e., industrial policy). Fiscal spending blowouts financed by budget deficits. Earmarks. Trade protectionism. Antitrust activism. Failure to address program funding shortages. Pork barrel spending. Inflation. Tariffs. Subsidies for politically favored industries.
This series of economic “own goals” is the last remaining vestige of bipartisanship in Washington – the culprits span the ideological spectrum, and the real-world impacts don’t respect party affiliation. As a result, real wages decline, the cost of living increases, economic security erodes, retirement balances decline, jobs are lost, opportunities are scarcer, businesses are destroyed, upward mobility is limited, life is less vibrant, and all are worse off.
Our economy has splintered into two poles – the haves and the have-nots, the asset-owners and the debtors – it is a tale of two economies with diametrically opposed experiences. With every election though comes renewed hope that our team will win and free us from the yoke of our opponents. But at what cost? The only thing we are consistently liberated from is the full value of our hard work and the upper bounds of our potential success. What is the catalyst for demanding more of our political leaders and holding them accountable? An honest assessment of the question may be more illuminating than the answer.
Make no mistake, the tariffs announced via executive order on Wednesday are the largest tax increase to the American consumer in the past 100 years. Not only that, universal tariffs and inflation are the most regressive forms of taxation as they disproportionately impact households with the lowest income. The Budget Lab at Yale and the conservative advocacy group Advancing American Freedom – founded by former VP Mike Pence (R) – have estimated it will cost over $3,500 per household a year.
For the approximately 50% of US households that make less than $75,000 a year, a significant tax increase after a period of stubbornly high inflation will undoubtedly cause significant pain.
The stock market’s reaction to the imposition of tariffs has been both swift and significant, marked by a palpable wave of anxiety and downward pressure. Over $6 trillion has been wiped out in just two days post the announcement, and the market’s decline wasn’t merely a sectoral issue; it reflects a broader concern about the potential for slower economic growth both domestically and globally.
It has been a remarkable shift from what was once a market buoyed by near-perfect conditions and pro-cyclical stimulus, to a market shaped by fear of slower economic growth, persistent inflation, volatile interest rates, and uncertainty. While our investment approach remains apolitical—focusing squarely on the economic impacts of policy rather than the politics behind them—the implications of these measures are real and material for all Americans.
In January, we made defensive adjustments to portfolio allocations by reducing US Large Cap Growth Equities (approximately -10%) in favor of short duration fixed income. This was not an attempt to time the market’s short-term fluctuations as we do not possess a crystal ball, nor do we engage in speculative betting on market direction. Rather, these actions represented a deliberate and prudent strategy aimed at safeguarding your portfolios against a confluence of emerging uncertainties and evolving risks that, in our assessment, had shifted the risk/reward balance unfavorably.
Our approach is rooted in the fundamental belief that intelligent, calculated risk-taking, rather than passive acceptance of any risks, is the cornerstone of effective, long-term wealth management. Equity markets, which historically have been the most potent engine for wealth creation, are inherently cyclical and prone to periods of volatility and drawdown. In our opinion, proactively protecting capital during periods where risks appear elevated or inadequately compensated is disciplined by risk management.
Looking forward, the outlook is extremely uncertain, and it would be disingenuous for us to definitively say we know where the market goes from here. In the face of whipsawing policy, that could be reversed as quickly as they were instated, we continue to closely evaluate conditions and may reposition as they evolve. We remain long-term oriented and disciplined, but adaptive and ready to navigate today’s uncertainty while capturing tomorrow’s potential.
For more information on tariffs, please read our I.D.E.A. series
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