In my March letter I wrote that I wasn’t yet worried. Am I worried now? Let me explain. By now you’ve already read more than you needed to hear about last week’s tariff moves from the White House. The market was shocked, but it shouldn’t have been. After all, Trump did exactly what he on many occasions said he would do.
Previously, most market participants thought the tariff talk was a negotiating tactic. But now, everyone believes it is a permanent economic policy? C’mon folks, why suddenly so first-degree? You can’t bluff without pushing chips on the table.
Okay, but what about the long-term damage to American credibility? Or the inflation this will cause, or the uncertainty that is rattling the U.S. consumer and financial markets? This is where the media’s triggering impact comes into play. Recall that the business model of media is to drive engagement. Engagement increases when there is something new and especially something new and scary. It therefore shouldn’t surprise you that coverage of the tariffs is focused on amplifying basic human emotions. I don’t blame journalists or operators of news websites. It’s not their fault. My point is that as an individual investor, or even a professional investor, it is very difficult to separate the information from medium in which it is provided. When you are watching the quoted value of stocks you own evaporate, this challenge is made more acute.
Is this the first time the US. had tariffs in place on imports?
No. Select tariffs have been in place since Trump 1.0. The Biden administration kept these duties in place. The economy seems to have survived just fine. Yes, the scale of the current round is multiple orders of magnitude larger. But for context, consider Covid19, which everyone remembers. The economy was shut down and people were forced to stay home against their will. There was a recession. Nine months later the market was higher despite everything. My point is not that the market shouldn’t go down on the tariff proposals. (It is behaving in a normal manner, in my opinion.) Rather, it is that even in a scenario where tariffs provoke a recession, it will probably not lead to whatever worst-case scenario that is currently being envisioned.
This serves to reinforce a point I keep trying to make about uncertainty.
In early January, when the market was at all-time highs, the belief was that visibility on the future was “good”. Three months later, the range of possible outcomes is now incredibility wide? I have struggled to articulate my idea here in a convincing fashion, but in both cases, I think people are fooling themselves. Visibility on the future in early January is the same as it is today. You don’t know what is going to happen. On the other hand, we can definitively say this with absolute certainty: Risk assets are now priced more attractively.
My approach to the market is to start by acknowledging that I don’t know what will happen in the future.
However, this does not imply being frozen. Instead, I solve for which stocks I want to own based on each company’s business model, management team, ability to grow and generate cash flow. Last week I spoke with several large retail companies and these businesses are not sitting still. Unlike Wall Street, retailers generally took Trump’s tariff promises seriously. They are working on strategies to mitigate their effects and continue their operations. Some are in better positions than others, but I am confident that many management teams will figure out solutions. There will be even cases where companies find ways to benefit from the chaos. Stock prices may trade lower first, but the best companies are still likely to be doing quite well on the other side of this nonsense.
Financial markets can be understood as a series of periods of relative calm and growth, interrupted by various crises, each one unique and different than the last. At least that’s the way it’s been during the last 25 years. Could the tariff regime structurally break the underlying forces that have created the US’s multi-decade dominance and equity out-performance? Anything can happen. However, I respectfully suggest that if you are asking this question that you have consumed too much triggering media.
Travel update: In early March I traveled to New York at attend an analyst meeting with Target Corp (TGT). While there I was happy to give a guest lecture at a securities analysis course at Columbia Business School on the topic of “three criteria of great stocks”. I have updated a condensed 11 minute version of the lecture to my youtube channel. You can watch it via this link. April current looks calm but in May I will be attending my daughter’s graduation from Tulane University in New Orleans. June will include stops in Washington D.C., Denver and Vail, CO, Southampton NY and very sexy Cleveland OH. Stay tuned for more details.
*This is not a recommendation. Please consult your advisor for investment advice tailored to your risk tolerance and investment profile.
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John Zolidis
President & Founder
Quo Vadis Capital, Inc.
John.zolidis@quovadiscapital.com
Mr. Zolidis has more than 25 years’ experience as an equity analyst. In 2017 he founded Quo Vadis Capital, Inc., a Registered Investment Advisor (RIA) offering investment management for individuals and an idea service for professional investors. He is a frequent presenter at value investing conferences around the world and a guest lecturer at Columbia Business School. Prior to founding Quo Vadis, Mr. Zolidis was a sell-side analyst following the consumer sector. He also managed money in a buy-side role at a long-short equity fund over 2013-2014. He was named in the Wall Street Journal’s Best on the Street list in 2005. He was named a RETHINK retail Top Retail Expert for 2025. He started his career in finance in 1996 following degree studies in Philosophy at Kenyon College and the University of Oxford. Mr. Zolidis and works from New York, NY and Paris, France or wherever he has his laptop.
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