Hiltzik: Unsure what to do about your portfolio? With Trump in the driver’s seat, so are the experts

This post was originally published on this site

You can’t take your eyes off your 401(k) account, you’re riveted on the real-time charts of the stock market indices, you’re wringing your hands over Donald Trump’s will-he-or-won’t-he follow through on his most dire treats to impose worldwide tariffs.

Don’t try seeking insights from economists and business leaders. They don’t know how this economic crisis is going to shake out any better than you do.

Market professionals have consistently advised ordinary investors not to let emotion dictate their portfolio judgments. Corrections of 10% and bear markets (judged as declines of 20% or more) are normal events over the medium and long term; and have always led to recoveries that are often stronger than the downturns.

That was the case in 2020, when the pandemic caused a 34% fall in the Standard & Poor’s 500 index in February and March, and the 50% decline from October 2007 to March 2009, spanning the 2008 financial crisis.

Most such downturns or panics reflected external economic conditions of one sort or another. But there hasn’t been one quite like the current crash, which has been caused by the stringent tariffs threatened or already imposed on the world by Trump, based on dubious economic theorizing.

In many previous downturns, it was easier to base one’s view of the future on market patterns of the past. Any number of financial indicators could tell us when prices moved into some level of equanimity with expected corporate profits, or reasonable expectations of future interest rates. Not this time, when policy-making at the White House seems divorced from reality.

So what is the average investor to do?

This isn’t the place to come to for investment advice, but I can share the standard counsel one hears from almost every personal finance guru:

If you’re at least a couple of decades shy of retirement, sit tight — the markets always recover and you’ll have time to capture the recovery; if you’re closer to retirement, raise enough cash to cover one or two years of expenses so you don’t have to sell into a whirlwind. If you’re already retired, you should have been lightening up on stocks anyway.

Then there’s the advice supposedly from J.P. Morgan that I quoted recently. When a friend told him he was so worried about his portfolio he couldn’t sleep at night, Morgan counseled: “Sell down to the sleeping point.”

The market itself — if one dares to vest it with a mind of its own — doesn’t know what to make of Trump’s tariff policies. In early trading Monday, the major stock indices started in the red, sank lower, then moved into and out of the black twice. And that was just within the first two hours after the market opened.

At least one of those upsurges apparently was the product of social media posts quoting White House economic advisor Kevin Hassett stating that Trump was considering a 90-day pause on tariffs scheduled to go into effect this week. But Hassett hadn’t said that, and the White House promptly denied it. The market sank again.

For anyone seeking alternatives to moment-by-moment doomscrolling on websites tracking stock averages during the day, there are a couple of potentially positive indicators to watch.

One is the congressional response to Trump’s tariff policies. It’s worth remembering that the Constitution gives Congress, not the president, the exclusive right to “lay and collect Taxes, Duties, Imposts and Excises” and “to regulate Commerce with foreign Nations.”

Congress ceded that authority to presidents chiefly via two laws, the International Emergency Economic Powers Act (IEEPA) of 1977 — recently used to impose tariffs on Canada, China, and Mexico — and the Trade Expansion Act of 1962.

But Congress could take that authority back. In fact, that’s exactly what a measure introduced in the Senate would do. It’s the Trade Review Act of 2025, jointly sponsored by Sens. Maria Cantwell (D-Wash.) and Chuck Grassley (R-Iowa). The measure would place a 60-day limit on any presidential tariff and give Congress the right to block it through a joint resolution of both chambers.

The pain inflicted on constituents by Trump’s tariff policy has driven six more Republicans to join Grassley as supporters of the bill.

That would be enough to pass it by a simple majority, but not quite enough to reach the 60 votes typically needed to pass bills in the Senate, or the 66 needed to override a near-certain presidential veto. (With the seven Republicans, the measure would pass 54-46.) If Trump continues to inflict pain on constituents in the GOP heartland, more lawmakers might break with him. Watch this space.

The received wisdom is that the bill would have no chance of passage in the House, which has a narrow GOP majority, but the same realpolitik calculation by Republican office-holders might change that.

The federal courts are another venue to keep one’s eye on. Last week, a conservative legal organization broke with Trump by filing a lawsuit challenging his invocation of IEEPA to justify higher tariffs.

According to the lawsuit, “in the IEEPA’s almost 50-year history, no previous president has used it to impose tariffs. Which is not surprising, since the statute does not even mention tariffs, nor does it say anything else suggesting it authorizes presidents to tax American citizens.” (The lawsuit is correct in treating tariffs as indirect taxes on consumers, according to orthodox economic thinking.)

That case and any others that might follow along the same lines would almost surely land before the Supreme Court.

Pressure on Trump is beginning to come from the business community and even within his inner circle.

At the outset of the administration, business leaders were complacent about Trump’s policies. Then Trump was talking about more modest tariffs, such as a 10% levy on Chinese goods.

On Jan. 22, for instance, JPMorgan Chase CEO Jamie Dimon counseled a sort of bovine complacency.

Speaking from the World Economic Forum in Davos, Switzerland — a gathering of business and political leaders that (as I wrote last year) boasts a nearly unbroken record of getting things completely wrong — Dimon said of tariffs, “If it’s a little inflationary, but it’s good for national security, so be it. I mean, get over it.”

Indeed, just after the election, Dimon said “a lot of bankers are dancing in the street” over Trump’s reelection.

That complacency evaporated as of April 2, when Trump unveiled a tariff regime that was much harsher than anyone expected.

In his annual letter to JPM shareholders published Monday, Dimon sounded a different note: “The recent tariffs,” he said, “will likely increase inflation and are causing many to consider a greater probability of a recession.”

Of the uncertainty caused by Trump’s lack of clarity about the size and timing of his tariffs, Dimon added, “In the short run, I see this as one large additional straw on the camel’s back.”

Some of Trump’s most sedulous supporters in the business community are bailing on his tariffs. One is hedge fund operator Bill Ackman, who in a Sunday tweet urged Trump to call a 90-day tariff time out.

By “launching a global economic war against the whole world at once, we are in the process of destroying confidence in our country as a trading partner, as a place to do business, and as a market to invest capital,” Ackman tweeted.

And Elon Musk, who has had carte blanche from Trump to rampage thorugh numerous federal agencies in a so-far futile search for waste and fraud, called over the weekend for “a zero-tariff situation, effectively creating a free-trade zone between Europe and North America” — quite the opposite of Trump’s approach.

Adding to the uncertainties are doubts about the skills and influence of the people around Trump. Hassett, for example, originally made his public splash as the co-author of a 1999 book titled “Dow 36,000,” which posited that the closely-followed index would reach that level within three or four years — trebling from its level of 10,273 points on the day of publication.

The book was spectacularly off-base, as Nobel Prize-winning economist Paul Krugman explained at the time. As it happened, the Dow didn’t reach 36,000 until 2021, or 22 years after the book’s publication.

Hassett’s economic theorizing hasn’t improved since then. After he tried to explain during a television appearance last month how high tariffs would “increase the welfare of Americans” by bringing manufacturing back from overseas, he was challenged by Harvard economist Greg Mankiw, who wrote, “No, Kevin, that’s not how we do it in Econ 101.”

Rather, trade restrictions, “by interfering with the international marketplace and the forces of comparative advantage … reduce productivity and thereby [gross domestic product].”

I asked Hassett through the White House press office if he had a response for Mankiw, but got no reply.

Other White House figures have offered similarly half-baked defenses of Trump’s tariff approach. Commerce Secretary Howard Lutnick, whose insensitivity to household finances I’ve reported on previously, was on CBS’ “Face the Nation” Sunday trying to explain how great it would be to move high-tech manufacturing back to these shores.

“The army of millions and millions of human beings screwing in little screws to make iPhones — that kind of thing is going to come to America,” Lutnick said, as though that would be a good thing.

Is there anything good about the Trump tariffs? The stock market doesn’t think so. Your elected lawmakers, Democrats and Republicans alike, don’t think so. Conservative legal activists don’t think so. So if you’re worrying about how this policy will affect you, you’re not alone. Whether that’s a good sign or not, we may not know for a while.