COLUMN-What Stoicism can teach investors about handling Trump: Pelosky

The views expressed here are those of the author, the Founder and Global Strategist at TPW Advisory.

By Jay Pelosky

Feb 20 - As investors try to figure out how best to handle the whirlwind that is Trump 2.0, they should consider embracing two key principles from the Stoic philosophy of ancient Greece and Rome.

First, imagine all possible outcomes and thus fear none. If the first few weeks of Donald Trump’s second term are anything to go by, the president feels less bounded this time around, meaning almost any policy proposal could be on the table.

Imagining all possibilities – whether it be 60% tariffs on Chinese imports, 20% blanket tariffs on all imports, 25% tariffs on cars, or no increased tariffs at all – allows one to be forewarned and forearmed.

Second, prioritize self-control and learn to understand what to respond to and what to ignore.

This means paying little attention to what Trump or his cabinet and advisors say, because as we’ve seen already, what is said on a Saturday can be reversed by the following Monday.

This ability to disregard the political theater could turn out to be an investing superpower, as it can allow one to focus on what counts while competitors are busy trying to decipher the signal from the Trumpian noise. Pro tip, there often is no signal.

So pay attention to what Trump does, not what he says. For example, his executive actions to freeze the administrative state for 60 days and shutter USAID, the aggressive efforts of the Department of Government Efficiency (DOGE) to gut the government workforce, and the push for tariffs as a fundraising tool all suggest Trump is serious about creating more room in the budget. This means job one is likely to be tax cuts.

Next, pay attention not to the news but to the markets’ reaction to the news. Forget about trying to keep up with the back-and-forth of tariff talk. Instead, look at how Chinese equities are responding to any tariff news. Are Mexican and European equities going up or down?

Heading into 2025, markets unsurprisingly started pricing in assumptions that “tariff man was gonna tariff”. This, together with better policy news in Europe and Asia, has caused U.S. equities to underperform sharply this year. European equities are up 13% in the year to date and Chinese large caps have risen by around 16%, compared to a roughly 4% gain in the S&P 500. Investors glued to the news likely missed this shift.

STOIC PLAYBOOK

So, having imagined all scenarios, been disciplined enough to ignore the Trump chatter and savvy enough to focus on the market rather than the news, what is the stoic investor’s 2025 outlook?

Artificial intelligence competition has been front and center in early 2025 and is likely to remain so, both among U.S. tech giants and Chinese upstarts, now that DeepSeek has burst onto the scene. The low-cost Chinese large language model punctured the myth of U.S. tech dominance and the U.S. exceptionalism narrative, while highlighting a significant investment opportunity in China tech.

It also raised the specter of a “Sputnik moment”, which could push the major powers in the increasingly Tripolar World – the U.S., China and Europe – to spend far more to keep up in the AI race. For example, Grandview Research calculates that the global AI market is worth approximately $400 billion and is expected to grow 5-fold over the coming five years.

The defense space has also recently heated up, after U.S. Vice President JD Vance and Secretary of Defense Pete Hegseth delivered a clear message to Europe at the Munich Security Conference: the bloc needs to arm itself.

This could drive tremendous government spending. The cost of the European Union’s defense build-up and reconstruction of Ukraine is estimated at some $3 trillion over ten years, according to Bloomberg. Such spending could help spur global growth and keep the global equity bull market going.

Foreign investors are also starting to repatriate some of the trillions of dollars that flooded U.S. capital markets in recent years. Why? Likely because of concerns about potential policy mistakes in the U.S., the need for more spending in Europe and Asia, and the fact that many assets in Europe, Japan, and China are relatively cheap, under-owned and starting to outperform.

This should result in a gradually weakening dollar, one of the most overweight assets in recent memory. Dollar weakness should then act as a tailwind for continued outperformance among commodities, such as copper and oil, as well as non-U.S. equities.

This could ultimately constrain Trump, as the U.S. government may not want to spur excessive capital flight when it has $9 trillion in U.S. Treasurys to roll over this year alone. The dollar, viewed as America’s strength, may thus actually be its Achilles Heel.

Looking forward, it’s fair to assume that the second Trump term is going to give investors many opportunities to act rashly, so they would be wise to remember the words of stoic philosopher Epictetus: “It’s not what happens to you, but how you react to it that matters”.

(Jay Pelosky is the Founder and Global Strategist at TPW Advisory, a NYC-based investment advisory firm. Jay is the creator of the Tri Polar World (TPW) framework and the Global Risk Nexus (GRN) system.)