Five for Friday

Déjà Vu, Taxes, Dollars, International, Chips

1. Headline volatility

In many ways, current market volatility and macro uncertainty is nearly unprecedented – one of the fastest 2-day drops in market history, record policy uncertainty, a crash in the dollar, etc. To the right are a handful of headlines from the last month or so that sum up the major headwinds. Wait, no. Apologies. Those are all headlines from 2018. Déjà vu? While the stakes may be higher today (bigger tariffs, higher inflation, etc.), one of the best comparisons for the current moment happened just a few years ago in 2018. That year, the S&P 500 saw two separate double-digit selloffs, including a bear market that troughed on Christmas Eve of all days (and note: the -19.8% drop in 2018 actually exceeds the 18.9% peak-to-trough drop seen in 2025 so far). What’s the saying? History may not repeat, but it does rhyme? This time may turn out to be much different, but the pattern has been very similar to 2018 – jawboning the Fed but not firing its leader, brash public negotiations with other countries, and ultimately a deference to market pressure that helped spark a historically strong 2019 market run. One big difference between Trump 1.0 and Trump 2.0 is the order of events – in Trump 1.0, the big tax bill came first and the trade war came second (i.e., candy before spinach). Today, not only did the spinach come first, but it’s been served with a  shot of Malört. Speaking of which…  

2. Taxes

A timely update on the tariff and tax discussion from our partners at Strategas, a Baird Company, where they write: “If the tariffs look likely to remain in place and the US economy weakens, Congress could also look at lowering marginal income tax rates, the overall corporate tax rate, and the capital gains tax rate to sterilize the impact…depending on which additional tax cuts are included, they can serve to nearly offset the entire tariff increase in year one of implementation.” There’s a recognition in Washington that the administration’s trade war will weigh on business in the near-term, and the renewed focus on passing business-friendly tax incentives are but one way to help the tariff medicine go down smoother.  

3. Dollar

The US dollar has plummeted ~10% in the last 100 days, and the weakness has prompted renewed concern about the greenback’s status as the global reserve currency. I wrote a two-pager exploring the topic in greater detail here.  

4. Going abroad

Of the 15 largest national economies (excluding Russia), only one has a negative return in its local stock market this year: the United States. With US investors likely overconcentrated in US stocks thanks to a decade (plus) of outperformance along with a natural home country bias, a move to diversify internationally – especially if the dollar remains weaker and the trend toward deglobalization continues – could prove quite prudent. Go n-éirí an bóthar leat!

5. On this day

in 1961, Robert Noyce was granted a patent for a “semiconductor device and lead structure,” the first integrated circuit to have all its components on a single silicon chip (spawning “Silicon Valley”) ‒ an innovation that made Noyce’s microchip more practical and easier to mass produce than previous iterations. In the age of smartphones and A.I., one doesn’t need to stretch to see the impact of Noyce’s revelation, but it is summed up well in a 1983 Esquire article: “The integrated circuit made it possible to create mini computers…thereby [opening] up every field of engineering imaginable, from voyages to the moon to robots, and many fields that had never been imagined. It opened up so many fields that no one could even come up with a single name to include them all. The second industrial revolution, the age of the computer—none of them, not even the handy neologism ‘high tech,’ could encompass all the implications.” I’ll close today’s piece with Noyce’s inspirational (and relevant as ever) maxim: “Optimism is the essential ingredient of innovation.”

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