Meeks’s Musings: It’s Cozy in This Bunker

I’m guilty. I’m one of those talking heads on business TV -- I appear weekly on CNBC, Yahoo!, and Bloomberg (I’m not conservative enough for Fox) -- who can at least inadvertently create investor anxiety by talking too much and by promoting too much portfolio trading. I’ve been on the air regularly since the mid-1990s. Believe me, sometimes the show’s producers whisper in my ear just before a segment to “bring the energy” and to “give actionable (trading) ideas.” Well, I should ignore that more often and you shouldn’t always listen to me if I don’t.

We all have nervous energy under stress. Whether you support him or not -- like for anyone or anything, there are always pros and cons -- Trump 2.0 has brought at least short-term chaos which has hit investors since his inauguration. The S&P 500 is -7% (excluding dividends) so far in 2025 (through March 28) after rising +24% in 2023 and +23% in 2024. For many businesspeople and investors, on-again, off-again tariffs, and uncertainty over how draconian they may be, have muddied the waters.

Let’s objectively look at both sides of this argument. The president’s trade war supporters feel that the confusion and any damage caused by tariffs may bring necessary short-term pain for long-term gain. However, the administration’s detractors see tariffs as potentially inflationary to which the Federal Reserve Bank (the Fed), which is responsible for US monetary policy, may ultimately have to respond to by raising interest rates.

What we know for sure is that the Fed has already changed its initial plans to lower its benchmark fed funds rate aggressively throughout 2025. After years of pushing rates higher to fight inflation, the Fed finally lowered them last September for the first time since COVID. Now the Fed is standing pat. Although the fed funds rate had dropped from 5.33% in August 2024 to 4.33% by the time President Trump had regained power, it has been stuck there since then. (The Fed meets every six weeks to discuss monetary policy and to possibly change this rate.)

If Trump 2.0 rekindles inflation the Fed may have to reverse course and raise rates which would be bad. However, if the near-term economic crunch looks to lead to a prolonged downturn that may result in private employee bloodletting even beyond Elon Musk’s DOGE (Department of Government Efficiency) mass federal government firings then the Fed will likely return to cutting rates.

How this all plays out is critical for investors and maybe even for some of our jobs. Because the confounded jury is still out on this, uncertainty will reign perhaps for some time. And the market hates uncertainty even more than it hates a certain bad outcome.

So, what’s one to do? Join me in the investment bunker. When stocks, including those of some of your favorite companies, are plunging, the temptation can be to double down. At some point, that may be a smart thing to do, but I think that the best bet during this chaos is to hide and just lock in the 4.30% annual return that you can earn in bulletproof three-month US Treasury bills. Then take another look at your portfolio and think about how you can rearrange your chess pieces to maximize your return when the market recovers because it ultimately will.

I’ll leave you with some homework. As you may know, the US Treasury Secretary is Charleston’s own Scott Bessent. He recently (March 18) gave an interview for the “All-In” podcast. It’s over an hour but it’s worth it to understand him and the economic policies of President Trump and how the administration plans to execute them. It’s on YouTube and can be found wherever you get your podcasts. through any app store. I’m a Citadel professor so, yes, there will be a quiz.