What Friday's White House clash means for stocks — and for my investing strategy

Published Sun, Mar 2 20254:16 PM EST

We struggle not to interject politics into our stock selection because we know it rarely, if ever, produces ideas that work. I know it makes the job a lot harder. But you don't pay me to feel badly about what's happening. That's not worth much, even as I do feel sad about the recent turn of events. Nor can I write, "How dare you ask me for stock help when President Donald Trump is berating Ukrainian President Volodymyr Zelenskyy? Haven't you more important things to think about?" The nature of the Investing Club is the pursuit of financial well-being. The importance of your portfolio is paramount. You don't expect a pro basketball player to not play defense because he is upset that Zelenskyy was admonished and belittled in the Oval Office. You can't use the White House as a reason why you failed to block a shot. I also will not punt and say it can't be fathomed — whatever "it" really is. Punting these days gets glorified as an actual decision. Isn't that what it means when people say "risk off." When I was running money the term didn't even exist. You don't come to me to hear that I have nothing to offer because it is too risky to own stocks. The derivation of the terms "risk on" and "risk off" has more to do with what big-time hedge fund managers are thinking about — cash, short or long S & P futures — than what we are doing, which is attempting to make money via individual stocks no matter the market. You are not going to get a Sunday email from me saying, "I cant figure it out so it is risk off." To me, risk off means, "What the hell do I know?" I know some things. Then why talk about what happened in the White House on Friday? Let me give you some relevant musings that actually lead up to a stock conclusion. Like many of you, I grew up in a bipolar world where the Russians were evil and tried to turn the world into a Communist slavocracy. We were trying to fight for freedom, and were not always great at it. But we never thought we were in the wrong, wholesale, except at the time of the Vietnam War when there were legitimate protests about our course of action. We were never pro-Communist or pro-Russian suppression. Ever. Then, thank heavens, President Ronald Reagan, the Russians lost. They became a second-tier player, with nuclear power, but otherwise not a factor even with a vicious dictator at the helm with a big army and lots of oil revenues. We were done with the bipolar world. We were done with Russia. We were supreme. It lasted like that for several decades until the Chinese emerged largely as economic competitors, not military rivals, although they never dropped their anti-Western ambitions from the time of their help to North Korea during the Korean War (1950-1953). I am not going to hold back my confusion at this current moment, certainly not after serving up what you already knew about our history. We had a common goal with the Russians against the Nazis. When we won World War II, they dropped a heinous Iron Curtain on central Europe and resumed their expansion around the globe. We fought them. We won. They lost. The Iron Curtain was no more. Under President Vladimir Putin, the Russians have tried to mount a comeback, including restoring the Iron Curtain. The effort has been failing. But we just switched sides and backed Putin's attempt to re-establish it. I wish I could actually process this switch. I only know the Russian government under Putin as standing against everything I was taught by my elders, by my professors, by my employers, by the clergy, by my father and mother and by every history book I have ever read — and I have read a lot of them. That makes my job difficult, but not impossible. Yes, I can't get my head around supporting the criminal gang trying to restore the Iron Curtain. But, again, you do not come to me for my body of work and wisdom about Soviet or Russian foreign policy versus America, especially when the Russians are not a credible, important economic force or market, with the exception of oil and gas. So what does it mean for the markets that we have a president that now goes against everything we were taught? If Russia was a good market for something, anything, I could try to be less cynical and give you a list of "winning" companies. But Russia is a small market. Remember the Soviet Union, including Russia, had a population of 170 million people in 1939. Now it is about 144 million people. No longer big enough to be considered a major market for anything except oil services and equipment. So why does it matter at all to the markets? Stocks are very hard to gauge when it comes to geopolitics. The Ukraine debacle only demonstrates that you have to expect that anything can happen with this White House and because of that you have to pay less for our stocks than you would for the European or Asian markets. Hmmm, perhaps that's why they are all doing better than ours? Most of that is self-inflicted, of course, as we are the ones that are tariff-mongering, not them. But given that we are supposed to be the winners when tariffs are added — we being our industries and our Treasury — it is telling that their markets are doing better than ours. Telling, in that nobody believes President Trump anyway when it comes to the creation of U.S. wealth via tariffs, and I write that as someone who supports targeted tariffs and fair trade, not free trade. So, let's go back to stocks and bonds and point out what can and can't be changed, or blurred or rolled back by Washington at this very moment. China is watching First, the biggest impact from our switch to the Russian side from the Ukrainian side is not in the European theatre at all. It's China. If I was Chinese President Xi Jinping, I would immediately move militarily on Taiwan, betting that President Trump may switch sides and back China. Trump might feel that the Taiwanese have been ungrateful and have not paid tribute. That's right. I might, if I was Xi, even ask if Trump would mind if the People's Republic of China (PRC) took over Taiwan in a bloodless exchange, in order to prevent World War III. Heaven forbid, Trump might go for that. If you disagree with that after Friday's White House exchange with Zelenskyy, you need to soul search your position. To me, this could be a tremendous opportunity for the PRC to stop this whole game of export restrictions from the U.S. and just turn everything on its head by taking over the island and, along with it, the most important strategic asset in the world right now, Taiwan Semi . If you are the leader of the repressive, fascist regime that is China and you see that President Trump has just sided with the repressive, fascist regime that is Russia, you might presume that he may bless your move. He may think it's glorious payback for all we have done for the Taiwanese and their lack of gratitude in return. Are the analogies that off-base? I don't think so, even as I sure hope it is not the case. No matter what, I'm sure Xi has been feeling he would have to invade Taiwan in order to not be cut off from the best semis. He might have felt like the Japanese did before World War II when we put an embargo on our oil. However, he may now believe President Trump's switch to Russia just greenlighted the takeover of Taiwan as a way around the chip embargo. There are consequences to such actions. This could be one of them. The idea that any of this is at all fanciful, or the musings of some sort of pro-Democrat (with a capital D) is just incorrect. I have maintained an incredibly hard line against China during its ongoing destruction of our myriad industries, and their endless stealing and appropriation of our companies trying to do business there. I have long been in the camp of our top trade leader Peter Navarro when it comes to China. We must hope that Trump is, too. Otherwise, my scenario of Taiwan Semi "falling" to the PRC is in play right. The impact? Wouldn't you know it, we are right back in Nvidia hell, where we all feel we have been for months now. Nvidia. Oh my. Nvidia. In a world where Zelenskyy gets thrown under the bus for lack of gratitude and starting a war that he didn't start, how can we defend an allegedly ungrateful Taiwan? Perhaps because, unlike Ukraine, there is something at stake economically? Will President Trump's advisers discuss the notion that if we care about keeping the Chinese from getting the latest and greatest Nvidia chips, we should care about Taiwan's sovereignty? Will Trump be persuaded by even cowed generals and naïve national security advisers that Nvidia and Taiwan Semi are of strategic importance? Do they even know that? If they don't, Nvidia's price-to-earnings ratio has to shrink even lower than it is right now, which is 27 times next year's earnings — for a company that has grown its revenues by 65% over the last five years. We know that the pain is being felt right now for Taiwan Semi. It's more existential for TSM than it is for Nvidia, hence why its stock has gone from $224 to $180, a more exaggerated decline than we have seen from most chip stocks. The market is furiously trying to figure out what happens to TSM if the Chinese invade, knowing that it is now far more likely than it was last Thursday. It is not furiously trying to revalue Nvidia, even as I would contend it should be, given the turn of events at the White House. Hence, my suggestion that an even lower P/E for Nvidia could be upon us. The already declining P/E of Nvidia has much to do with its restless shareholder base, both those who aren't all that familiar with Nvidia and what it does as well as those who bet on it daily via zero-day options. The latter played a huge hand in the collapse of the stock Thursday, a day after the company reported earnings , because once the stock crested and started going down the zero-day options act like gasoline thrown on a slow-burning fire. It's not possible for Nvidia's stock to regain its luster as long as its shareholder base is infiltrated, if not riddled, with those who don't understand the role Nvidia plays in generative artificial intelligence and accelerated computing. Nvidia the company is greater than ever. Nvidia the stock is truly a nightmare for anyone trying to figure out its direction. It is, alas, becoming a meme stock, as repugnant as that might be to most of us. A meme stock means a stock that is manipulated by unseen forces that ultimately hurt its valuation. But let's say, let's conjecture (or even at this point fantasize), that everything stays the same geopolitically: What do we think of stocks besides Nvidia? Countervailing forces Right now, we are in a vacuum when it comes to earnings. Historically, that vacuum has been filled by a positive feeling about stocks, unless the Federal Reserve is about to tighten. This is the first vacuum where have a president who, at least in the short term, does not care if his policies knock down stock prices while the Fed is distinctly on hold because of inflationary fears. However, like everything else in the stock market, there are countervailing forces that can help stocks, and get them to rally. First, Trump's actions of late have created a level of bearish sentiment that we haven't seen in a couple of years. That means there are, at last, some bears and some cash, that can be coaxed back in with a cessation of presidential economic intervention. Second, the economy is slowing rather dramatically. We don't know how much of that is weather and how much of that is consumer spending, which has gotten very weak. Third, the DOGE (Department of Government Efficiency) actions may cause an unemployment spike which would influence the Fed in a positive way. Fourth, the strains of inflation that we keep feeling may be counteracted by the lack of housing activity, even as the price of housing is not included in the consumer price index, and slower auto sales (something that we haven't seen since before the supply disruptions stemming from the Covid pandemic). All four of these are not about the fortunes of companies, but we don't really need to focus on those because the fortunes have been consistently positive. We will certainly know more when we get the February jobs report on Friday. It could very well be a catalyst for an interest rate cut and there will be a reversal in sentiment that would trigger the buying of stocks. That could include the Mag 7, which do well when the economy is slowing, something we may have forgotten during this new anti-Mag 7 era. Of course, there are always people who will tell you that we are now set up for stagflation, or a period of high inflation and slow economic growth. I heard their mindless chatter both Thursday and Friday. Gasbags. I actually saw the real stagflation when we had it under President Jimmy Carter. This is not stagflation. But if enough people say it is, we will not be able to mount much of an advance in the stock market. The billionaire class will certainly claim it is stagflation. They are easily booked on TV and will be heard from this week. Just something to keep in mind. The direction of the market might all come down to the mercurial musings of President Trump. I am sure he is confused. Perhaps he attributed the market's late day rally on Friday to the Zelenskyy beatdown. If you were hoping he was worried about the impact of his actions on the indices, that was dashed by Friday's buying barrage. Will next week bring the tariffs on Canada and Mexico or some sort of stay of execution? Trump on Thursday said the 25% charge on imports from those two countries will go into effect on Tuesday and that China will be charged an additional 10% tariff on the same date. Has the president decided his soaring Nielsen ratings are better than a plummeting stock market if there are full-bore tariffs placed on Mexico and Canada because of their intransigence? In the absence of earnings, I say always go with sentiment. That makes it harder to be bearish. The S & P 500 Short Range Oscillator, our most trusted indicator of how to act during big upswings or huge downdrafts in the market, isn't even at a minus 2. (Anything above a plus 4% indicates the market is overbought; anything below a minus 4% indicate the market is oversold.) That also tempers optimism. And I was only being somewhat facetious on Thursday night's "Mad Money," when I said President Trump favors Every Day Lower Prices for stocks, Walmart White House. So I say look for opportunities that have nothing to do with tariffs. Be concerned about autos and housing, the two sectors most hurt by tariffs. Remember that there is a mismatch of white collar workers being laid off while immigrants fear for their time here and go underground. Expensive white collar workers laid off, inexpensive migrants disappearing. Their jobs will not be filled by former federal pencil-pushers. Their hammers will not be taken up by those who have lost their white collar employment. It's a lot more complicated than the previous era, where we were lead by a president who didn't care about stocks but who also didn't seem to care that much about creating extraneous events that impacted stocks. But that doesn't mean we can't try to figure it out. And being opportunistic in a new, different way is the best I can offer. (See here for a full list of the stocks in Jim Cramer's Charitable Trust.) 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U.S. President Donald Trump meets with Ukrainian President Volodymyr Zelenskyy at the White House in Washington, D.C., U.S., Feb. 28, 2025.

Brian Snyder | Reuters