On Monday I was listening live to Donald Trump jousting with journalists at the Winter White House, Mar-a-Lago, and he was asked about China and President Xi. This is how he answered:
“We have had some very good conversations… China and the United States can together solve all of the problems of the world… He was a friend of mine… He was here for a long time, we spent hours and hours talking, and he’s an amazing guy… the press hates when I say that but he’s an amazing person.”
To be fair, he has said this stuff before, and Trump being Trump his personal love-in with Xi won’t stop him slapping large tariffs on Chinese imports. Nonetheless, since his first term his age will make him more aware of his legacy, and he has a very Pro-China Elon Musk in his ear. Encouraged by his son, he has even begun to talk warmly of (Chinese-owned) TikTok.
I believe this is where the greatest potential lies in 2025, avoiding The Trap and together providing world leadership on a range of fundamental issues. But you cannot attach any odds to this possibility, not with Trump. You can only pray.
Before coming on to some book and audio ideas for Christmas, let’s glance at the last week.
It wasn’t great. No major market was up. China fell less than most, and the Dow Jones, Brazil and Europe ex-UK fought it out for worst performance, all down about 3.8%. Commodities took a bigger hit, gold miners down 9% for example.
The US reduced interest rates and the Fed warned that further cuts would be limited. This was all as expected, yet some investors saw this as an excuse to head for the exit ahead of Christmas. The S&P 500 was down 3% overnight, tech-centric Nasdaq down 3.5%, and US small caps off by 4.4%. These falls are not particularly sharp. But they do serve to remind UK-based investors in US stocks and funds that you can be very exposed to overnight falls. Double digit percentage falls will be commonplace when the bear market downturn takes hold, whenever that might be.
For my part, I have had an eye on the S&P 500 uptrend since August 2024. If this uptrend was a diagonal triangle, that uptrend has just broken and there is a further 10% of downside in this index, which could unfold rapidly in the period just ahead. But, and this will upset some of the perma-bears, this does not appear to be the end of the multi-year bull market, with an imminent bursting of the crazy US-centric bubble and investor mania. If that is the case, there will be more US upside after this 10% correction.
Bizarrely, the US cut rates even though their economy is progressing just fine, whereas the UK held rates though the economy is clearly weakening. It was difficult to make much sense of what the Bank Of England had to say – they weren’t even clear enough to be categorised as Delphic.
The UK is suffering from stagflation, inflation up, growth down, and this is tough. If you act to reduce inflation you hit growth – if you work to boost growth, you spur inflation. If the Bank Of England holds or raises rates to blunt inflation, that is OK if the government takes fiscal action to boost growth e.g. targeted tax cuts or subsidies, increased infrastructure spending. But none of the latter is on the table, quite the reverse. This will have to change, hopefully sooner, and not later after more damage has been wrought.
Now those Christmas ideas. If gold is going to be a bigger part of portfolios in years to come, Peter Bernstein’s The Power Of Gold is a great read. If you hold gold, this will ensure you are on board as a realist not a fanatic.
Whether or not you are comfortable with China in your portfolio, those of us in the Anglo-Saxon sphere could do with an antidote for the narrow views on China which populate much of the Western media. Michael Wood’s History Of China shines a light on the Chinese culture and mindset which has been established over a few thousand years.
It took me a while to get to Spotify. It has been a fantastic addition to my musical armoury. I didn’t realise it included other gems, free audio books being a case in point. It also pushed me towards The Rest Is History (TRIH) podcasts, definitely a latecomer relative to my friends and the kids.
If you do embrace TRIH, there is so much to recommend, and everyone will have their favourites. I found a particular resonance in “America in 1968: George Wallace, The First Donald Trump”.
I did have more planned for you today, but I have a bit of a cold so am retreating from my desk for 2024. Thank you all for reading these notes over the year, and do keep your feedback coming, which is invariably positive and encouraging. Do enjoy a peaceful Christmas, from myself and all of the FundExpert team.