WELL, SO MUCH FOR NOSTALGIA!

Last Friday, I penned a post for this column focusing on the 10^th anniversary of KOCAA funds. That now seems so long ago! As I write this on March 3^rd in the morning, stocks are generally flattish with the Dow up slightly, the S&P essentially flat and the Nasdaq slightly down. Not much to see here. I have been watching the performance of European stocks as the Euro Stoxx 50 is up 13.47% this year, and up about 15% when measured in local currency^[1]. I was recently asked by a client to help them understand why they still own small cap and international equities in their portfolio. These segments provide additional diversification and help offset a large cap-centric domestic portfolio allocation. We shall see how long the sun is shining on non-U.S. stocks, but this year, that segment has helped.

Unfortunate is the word I have been using to describe the interaction between President Trump and Zelensky that occurred last week. This interaction has ignited the Democrats to come out forcefully against President Trump at a time when we clearly need a bipartisan approach to our spending and debt problem. President Trump will be speaking to the country on Tuesday, and it will be important for him to try and get Congress focused on the important work that needs to be accomplished. I believe this world is also watching to see if the U.S. will continue to support Ukraine or if “America First” means Europe needs to be the cop on their own beat. This type of dynamic changes 80 years of U.S. influence in that region of the world. We are watching to see what geopolitical changes will ultimately have on global markets and how this influences interest rates and inflation in the U.S.

This morning there has been more talk out of Washington for greater tariffs on Canada and Mexico and doubling a tariff in China that would impact about $1.5 trillion in annual imports. This type of situation will likely contribute to inflation and could slow economic growth. If this occurs, the Fed may have some of their work done for them as interest rates may settle lower due to slowing economic activity, which could lessen inflationary pressures. Quite a bit for the market to digest in the short term.

The world has become more complicated and dangerous. Complicated in that tariffs add a level of complexity to our inflation and economic growth outlooks. The U.S. also needs to get our fiscal house in order and start figuring out how to manage our long-term debt. The dangers in the world are not centered in any one place. North Korea still has nuclear ambitions and wants to be heard. China still has an eye on Taiwan. Iran wants to keep a strong influence in their neighborhood and still has nuclear ambitions. The situation between Israel and Palestine remains unsettled. Quite a bit to digest here too!

More to come.

[1] Source: Bloomberg