I’m sure it is the question on everyone’s mind, and while I am no fortune teller, I’d like to share few thoughts on the subject:
1. Current policy of the Trump administration is completely misguided, confused and, if continued, will inevitably lead to a major crash. Not just a market crash, but an economy crash. US is not in a position to internalize all production; it can’t happen, it won’t happen. We can maybe strangle the market enough to get some of production back, at a great cost to the consumer and with huge sacrifice to the level of life. This is what almost every economist understands, and this is why almost no one believed this is their real goal. Most economists do not believe anyone can be that misguided on the implications, and therefore we looked at it as a “negotiation technique” rather than a policy. Unfortunately, it looks more and more like this IS a policy. If so, markets will undoubtedly exert more and more pressure on the government, as they already do. And the weakest point is not the equity market, but the bond market. There’s very little anyone can do if bond market begins to crumble, because any attempt to artificially support it by the Fed will lead to other problems.
2. If the plan is to hold negotiations, or if the plan is adjusted towards negotiations, we have a better chance to get out of it with minimal losses, but even then market crash is still a real possibility. First of all, trust in US government is already damaged, and it’s not coming back, not until the next administration, if ever. There are moves being made now by the major players, and they will not be reversed. It will become manifest in the economy weeks and months from now, affecting interest rates and unemployment levels. Nothing anyone can do to reverse this. Second, markets were overpriced even before the current madness, but there was a general belief they will hold despite common sense, since there was no particular reason for them to go down. Well, now they did go down. That logic no longer works. The boat has sailed, it’s not coming back to port. Even a complete, 100% reversal of this misguided policy is not going to bring us back to the situation before the Second Fools’ Day (also known as “Liberation from common sense” day).
3. My personal strategy now is to shift everything into European bonds and inflation protected securities, as those are safest assets. I would not invest into stocks or bonds until the market has settled. It will probably take months, if not years, to see full effects. I would not keep too much $ cash either, because of the possibility that bank accounts will be frozen and exchange rates drop to the point that up to 50% of US dollar value could be wiped out. FDIC insures nominal amount, not a real value. If you want to keep cash - look into a basket of currencies, including Swiss frank, Euro and Pound. Best if it’s held in a foreign bank, although there are problems with opening and holding foreign bank accounts for most people.
This is my analysis. Feel free to disagree.