Navigating an Uncertain Future

April 3, 2025

I wrote the beginning part of this letter prior to the market turmoil after Trump’s announcement yesterday. If you wish to go straight to my opinions, skip to the section “Actions and Reasoning”.

“The only thing we have to fear is fear itself”

- Franklin Delano Roosevelt

My role is to help navigate an uncertain future (it always is uncertain) based on the reality and probabilities. Given that, I must acknowledge that the American people voted for a Republican platform, and they are making changes with haste. It is the usual political fistfight (as it’s been through our history), with both sides fighting for every inch of turf using all the resources at their disposal. I don’t see much new on this front. However, the policy changes from the status quo are material, and that is always hard for people to adjust to.

Emotional Decisions almost always hurt:

Reacting to emotion, making decisions based on how you feel, leads to mistakes that can end up hurting oneself. People want to achieve certain outcomes in their life: wealth, health, peacefulness, etc. But many of their shortterm behaviors are not congruent to achieving what is most important. I am witnessing a great deal of self-harm right now, and I do lament that many U.S. Citizens cannot see how wonderful their lives are here in the USA.

Much as I empathized with the way people felt during the pandemic, I feel the same empathy now. However, the advice I will give is the same today as it was then. Reading through some of my old commentaries during that period suggests that a similar dynamic is occurring today. Many newspapers and social media sites are reporting with extreme negative bias to feed people’s fears, with the hope of attracting more attention to their websites. They seem to be doing an outstanding job! If you are feeling anxious and fearful, I may have pinpointed the source of your consternation.

In July of 2020, during the height of the pandemic, and chatting to a very fearful and emotional public, I wrote in: Gratitude and Perspective that despite the spread of Covid infections, that deaths were declining precipitously and that job growth and economic recovery were taking place. Do you think the media was pointing out positive improvements? They were not!

And the same is true today. Based on my personal experience with the newspapers, I can tell you that the newspapers are very negative. I don’t watch television, and I do not look at social media because it’s important for me to remove as much bias as possible in my effort to be a good steward of your wealth. Savvy politicians on both sides use the media to instill fear in their audiences to win at the game.

However, just as in 2020, life is good despite how you might feel.

a) You are probably not going to feel this negative emotion forever.

b) You are incredibly fortunate if you live and work in the USA.

c) This too shall pass.

If too much energy is given to your own fear and anxiety, without stepping back and reflecting on the great gifts granted you, you will not have energy to appreciate the things that matter most in your life, nor will you be able to see the potential opportunities that are presenting themselves right now!

As an example of this, consider, back in July of 2020, the S+P 500 index was closer to 3000, and today it stands at over 5600. Ask yourself: Did you make the most of this opportunity? If not, why not? I ask myself these types of questions every day. What did I miss? What can I do better next time? What is holding me back?

Carpe Diem! Seize the day!

If you’re feeling anxious, here’s my advice to feel better:

Tip #1: The usual advice from me: STOP looking at (in order of importance) social media, television news, and even newspapers. Media businesses want to feed your negative emotions, and artificial intelligence effectively feeds the negativity bias of your brain. The easiest thing to do is turn it off, go for a walk, and feel the present moment. Politicians are using you as pawns in their game, and they are using language to feed your negativity. STOP looking at it for a month; see how you feel.

Tip #2: Have Faith in humanity: Most people are good. Most people care about their fellow human beings. If you are becoming cynical and distrustful of the motives of others, you’re hurting yourself. STOP and be more open-minded.

Tip #3: Focus on gratitude. I have an old boss who likes to ask: “If I gave most people (without wealth) on earth $50k and a plane ticket to make a better life in another country, where would they go?”. For most people that is likely to be the United States. For my U.S. readers, I think it’s important to reflect on how lucky we are to be citizens.

Looking on the Brighter Side:

Although I lament seeing people anxious, when people make changes to their investments based on emotions, it often results in mistakes being made. When sentiment deviates from my perceived view of reality, potential investment opportunities present themselves. That can result in good outcomes for August Wealth, the families we serve, and our own portfolios. Let’s hope so!

Hope and Faith are important attributes. If you don’t know by now, my approach to investing is philosophical. To me, this is essential to pursue investing success. I won’t get into detail (some of which I’ve written about before), but there are truths in life which to me are undeniable. These truths provide the compass to move forward.

The ideals that the United States stands for in its constitution embody many of these truths. Our democracy is fragile, and it is not perfect, but I believe the preamble to the U.S. Constitution provides the motivation for a legal system to protect and defend these “inalienable rights”.

These ideals are bigger than any one person or any party platform. When we fail to live up to them, those are our collective failings. These ideals are precious, and in my opinion should be defended against those opposed to this liberty and justice.

The great thing about the chaos and discord among the people of the United States is that we continually course correct when we feel we are on the wrong path. I have faith that we will continue to do this long into the future.

Change and course correction is happening now; it feels uncomfortable, and we do not know how things will turn out. If it turns out well, we will reinforce those policies, if not, we will change direction. There will be battles and disagreements; that is politics. It’s an ugly business, and it always has been.

With my probability hat on, it is likely that the legal system will prevail, power will ebb and flow between the 3 branches of government (as intended). So have faith in the system; the ideals are bigger than any one person.

Implications of Change; Interpreting the evidence, weighing the probabilities:

“It ain’t what you don’t know that gets you into trouble. It’s what you know for sure that just ain’t so.”

- Mark Twain

I think I am open-minded when it comes to weighing market evidence because I understand that what we don’t know is far greater than what we do know. When so-called experts speak with authority on what they know for sure, I know for sure they do not know!

Actions and Reasoning:

• As discussed previously, we reduced equity risk (stock market exposure) earlier in the year to reflect the government policy changes which would likely (in our opinion) increase near term uncertainty and volatility in the financial markets. This action was taken with the objective that if the stock market fell, our portfolios would fall less than the market.

• Our job at August Wealth is navigating an uncertain future to help you in your unique financial situation, achieve your goals, within your risk tolerance and liquidity needs. Striving to maintain and grow your wealth methodically over years.

• Uncertainty in the short-term is causing the markets heightened anxiety and investors are reducing risk by selling stocks (among other assets). This is especially acute after the recent greater than expected tariffs announced by President Trump.

• Computer trading is likely exacerbating the short-term trends and narratives which take place in the stock, bond, currency and commodity markets globally.

• Maintaining a longer-term investment time horizon, especially if you are investing in stocks, is important because: o In the short-term, stocks can and will fluctuate based on new information, emotion, what’s hot and what’s not, and computer programs are much faster at taking advantage of these changes.

  • In the long-term, stocks of companies should reflect the value of their future cash flows.

  • It is important that an investor assumes that equity prices (and their portfolio) can drop in value (especially in the short-term).

  • When short-term events push prices down far enough, some companies become inexpensive relative to their likely stream of future cash flows. This is manifesting itself today. The trick (as I see it) in investing is to practice what an old colleague of mine refers to as “Time Horizon Arbitrage”. Utilize short term price changes to help achieve longer term objectives

My Opinions: Risk and Opportunity:

• People may be viewing the changes being made by the Trump administration as complete chaos and without thought. That is not my impression. I believe they have clear objectives which they are trying to achieve. I will not judge the merits of policy, but I will consider what may happen based on my probability assessments.

• The administration is implementing changes to the system quickly because they know they likely have less than 2 years with a majority in the House and Senate, and they know that Trump is a lame duck president.

• The administration has brought in some unconventional outsiders to government that have a history of impressive achievement against long odds. They do not deviate from their objectives because people may disagree with their beliefs.

• The status quo is being upended. It seems the global trading order the world has maintained for decades is likely no longer applicable.

• If the game is being changed, analysts and economists using existing economic models are likely to be much less useful. Game theory of how other governments may or may not act need to be adjusted. But economists like most people don’t like to change and throw out their previous work. Investors are likely to make mistakes, and mistakes can represent opportunities for the open minded.

• Increased probability that the U.S. Government deficit will improve:

  • Tariffs will increase tax collection.

  • The size of government will decline.

• Increased probability of an increase of investment into the United States.

  • Global companies will want to sell to the U.S. Consumer with the least amount of friction.

  • Deregulation in many parts of the private sector.

• Higher probability that countries will negotiate with the Trump administration to reduce tariffs instead of retaliation.

  • The US is being very clear that the game has changed. Others can either get with the program, or not.

  • In most instances, it seems that it would be in other government’s best interest to engage constructively given the new rules. Retaliation will likely lead to more isolation.

• Higher probability that China’s economy is weakened further.

  • The ideals of the Chinese government are in many ways opposed to the ideals that the USA represents.

  • Selling exports will be increasingly difficult.

  • The Chinese growth miracle was based on the old rules: free money (0% interest rates), open trade with other countries, obtaining intellectual property, subsidizing industry, and cheap labor. The challenges appear substantial in a new global system.

  • Difficult to increase domestic consumption and shift the economy.

• Growth in the USA will likely slow in the near term.

  • Recession and inflation are words that will get thrown around, but these definitions are not particularly useful. There is likely to be job losses in some areas and gains in others. It’s a timing issue.

  • Some growth slowdown is likely priced into the market and asset prices already.

• The situation in the middle east will improve.

  • The government in Iran looks increasingly likely to fall at some point in the next couple of years. They have already been significantly marginalized.

  • The people in the middle east will become exhausted from war and despair. People need security and hope. Governments will come together and move towards a more peaceful solution.

• European security and defense are more assured.

  • The US will support and applaud efforts to increase defense spending, and the partnership between our liberal democracies will become stronger and more reciprocal.

  • Russia and Ukraine are likely to come to a settlement.

  • Russia is much weaker as a country, and it will face a much greater deterrence from European defense. It will want to re-engage with the west and start to normalize relations after a war that failed to achieve most of their objectives.

Summary Thoughts:

I understand it’s hard to watch your portfolio drop in value over short terms. It’s especially difficult if you’re already emotional. The only assurance I can give you is that we continue to work hard on your behalf, and I believe we are well prepared.

I am neither overly pessimistic nor optimistic about near term prospects. But I can tell you that I am very confident in our approach to markets, risk, and implementing a strategy that is appropriate for you.

I am also very excited about the opportunities that are presenting themselves in many companies. Prices are going down, and they may face near term challenges. However, many companies have strong cash flows and have good prospects for growth of those cash flows. I believe technological change will continue unabated, and that will provide exciting new prospects and entire industries.

Lastly, do not underestimate the ideals that the USA represents. Our government structure provides a foundation that allows for new ideas, change, and development. I suspect that the country will become stronger and more resilient. Don’t lose faith, don’t lose hope.

Lots of Love, Joe

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i Investment advice offered through Stratos Wealth Advisors, LLC, a registered investment advisor. Stratos Wealth Advisors, LLC and August Wealth Advisors are separate entities.

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