COLUMN-Time for investors to play the long game: Pelosky

By Jay Pelosky

May 30 - Investing, like golf, is a mix of both the short and the long game. In the wild first half of 2025, investors have mostly focused on the short game, but now that we appear to be entering a period of relative calm, investors can start looking much farther down the fairway.

Following months of back-and-forth tariff drama after President Donald Trump’s April 2 ‘reciprocal tariff’ spectacle, many markets now appear to be settling down.

U.S. equities jumped around a bit this week, as news that a court had blocked much of Trump’s tariff agenda was quickly followed by the announcement that the tariffs would remain in place during the appeals process.

The upside of any future tariff news is apt to be limited because the risk-asset rebound already appears to have largely run its course, with most U.S. markets – excluding the dollar index – more than recouping their post-‘Liberation Day’ losses. The S&P 500 and Nasdaq are up around 18% and 25%, respectively, since April 8.

Market focus in the U.S. now seems to be shifting from tariffs to tax cuts, as investors zero in on the impact that widening budget deficits could have on U.S. interest rates and dollar strength.

Outside the U.S., attention also seems to be turning away from the trade war, with many investors homing in on the potential for spending-driven European growth, the return of Japanese inflation and the gradual recovery of the Chinese consumer.

So let’s take advantage of the current reprieve from market turmoil and consider how these longer-term trends could impact investment strategy over the next five years. That means freeing our minds from day-to-day moves and using the Stoic strategy to imagine how the world might change between now and 2030.

MADE IN AMERICA 2030?

Let’s first consider the scenario in which the U.S. is transformed as Trump appears to desire. Based on the policies the administration has pursued or espoused, that could mean bringing back some manufacturing to the U.S. or perhaps even lowering the trade deficit.

But it would also likely mean deepening America’s fiscal problems, creating more division among U.S. allies, undermining the rule of law, driving out human talent, shredding the country’s renewable energy programs, and stopping up wells of research and innovation.

The anti-innovation measures are already piling up. The number of clean energy projects that were cancelled in the first quarter of 2025 was more than triple the monthly average in the prior two years, according to E2. Meanwhile, the administration has sought to strip funding from major U.S. research universities and is now cancelling visa appointments for foreign students.

The post-pandemic years were all about the U.S. pulling ahead, as increased fiscal spending, technological innovation and population growth attracted offshore capital and boosted economic growth, corporate earnings, stock multiples and the value of the dollar.

Given the Trump administration’s agenda, the next five years are likely to be radically different. In just the past few months, the U.S. growth advantage versus Europe has shrunk, EPS growth among U.S. companies has fallen, the U.S. tech edge has been eroded by the release of China’s DeepSeek AI model, and capital outflows have continued.

REGIME CHANGE

When America lags, others must lead. And as I’ve written previously, there are many reasons to think Europe and Asia could use the U.S.’s post-pandemic recipe to pull ahead in the coming years.

Europe certainly has a chance to seize the mantle of leadership, leveraging its fiscal space and currency strength to deepen regional integration. It could utilize its soft power and respect for the rule of law to flex its hard power. By building more alliances, expanding its capital markets and attracting more foreign and domestic investment, it could develop internal defense capabilities and supplant the U.S. as home to the world’s safest assets.

As European Central Bank President Christine Lagarde noted this week, it is now within the realm of possibility that the euro could replace the dollar as the world’s major reserve currency.

Meanwhile, Asian integration is apt to continue, as Southeast Asia has now become China’s biggest trading partner. Beijing has successfully used industrial policy to become the global leader in renewables, skills it is now bringing to bear in advanced manufacturing. Importantly, China appears to understand the linkages between artificial intelligence and renewable power – a key nexus in the new technological race.

Japan, South Korea and other Asian nations likely have no desire to choose between the U.S. and China, but Trump’s isolationist policies could force that exact choice – and he might not like the outcome.

Of course, if Trump were to reverse or soften many of his policies, especially around renewable energy and immigration, take the tariff off ramp given to him by the courts and seek to simply extend his previous tax cuts rather than make aggressive new cuts, then the U.S. could potentially continue to outperform.

But all that seems highly unlikely. And regardless of what Trump does now, governments in Europe and Asia know they need to up their game by spending more, and there is far more fiscal space to grow in these regions compared to the U.S.

In golf, winning the long game requires flexibility and strength, practice and determination. In the long investment game, those qualities also play a role, but, ultimately, vision wins, especially in times of change like the present.

(The views expressed here are those of the author. Jay Pelosky is the Founder and Global Strategist at TPW Advisory, a NYC-based investment advisory firm. You can follow Jay on Substack at The Tri Polar World.)