DAILY ISSUE

The Word That Took Over Wall Street — and What It Means for Your Portfolio

Tom Yeung here with today’s Smart Money.

In 1812, the English word unprecedented doubled in use, according to Google’s “Ngram” study of historical books.

America’s war with Great Britain had just begun… Napoleon’s Grand Army invaded Russia… and journalists of the day delighted in reporting these events with eye-catching words.

The same Google study now finds the word unprecedented in vogue again. The 13-letter word has been used to describe everything from financial crises to technological innovation. The term was uttered in 75% of S&P 500 earnings calls in 2020.

It’s tempting to call everything President Donald Trump is doing “unprecedented” as well. We’ve never seen America’s executive branch unilaterally raise tariffs to double-digit levels overnight… nor have we seen stocks whipsaw double-digits on a single presidential announcement.

To U.S.-focused investors, this all seems entirely new.

But experienced investors will have seen similar stories before… just not in America.

In today’s Smart Money, by drawing parallels to other countries, I’ll explain why President Trump’s hasty actions aren’t as unprecedented as they seem.

Then, I’ll outline our best- and worst- case scenario plans for riding this unpredictable market…

And how you can make sure you’re prepared to profit for both.

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History Repeats Itself

In East Asia, strongmen-styled leaders have been around for decades. Many credit the military dictatorship of South Korea for the country’s success in the 1960s and 1970s. Singapore got its start from a 31-year rule by a one-man “democracy.” More recently, we’ve seen similar rulers in Turkey… Poland… Bangladesh… and so on.

President Trump follows a long list of leaders seeking to consolidate power to steer their countries in new directions.

And the one lesson we can draw is this:

It’s almost impossible to know who will succeed at the start.

Some countries start strong… only to devolve into chaos. An investor who bought the Turkish lira in 2014 when the current president was sworn in would have lost 94% of their original investment. Egypt and Zimbabwe remain cautionary tales.

Despite the odds, some countries do a supreme job at reform, turning them into investment superstars. Singapore was once described as a “swamp-filled jungle,” destined to fail because it lacked any natural resources. The country’s stock market is now the second most valuable in Southeast Asia.

Additionally, many were skeptical that the outspoken President Javier Milei could succeed in Argentina. That South American nation had previously defaulted on 22 International Monetary Fund (IMF) loans, and the “shock therapy” Milei was prescribing (cutting 30% of government expenditures, slashing subsidies, and so on) could have easily killed the patient.

But we began seeing the first signs of success in mid-2024, when Argentina’s month-to-month inflation fell to single digits and the economy returned to growth.

And things have continued to improve. Two weeks ago, Argentina finally secured its 23rd IMF loan, a highly positive sign of the country’s turnaround efforts.

This unpredictable path of government reform is why I like to think of President Trump’s policies to an asteroid heading toward Earth.

We have no idea whether disaster will hit… or pass us by entirely.

So, here is what we think of each possible scenario…

How We’re Covering Our Bases

In our best-case scenario, the danger of a great recession (or depression) passes us by entirely. Trump’s tariff wars are resolved, leaving us with no major impact on inflation, supply chains, or long-term investor confidence.

Instead, we’ll see enormous leaps in artificial intelligence, energy innovation, and biotech sending markets to new all-time highs. We might also benefit from the re-onshoring of high-tech industries like advanced chipmaking and solar panel production.

In this case, we’re sitting on one of the decade’s greatest moments to invest.

But what if President Trump’s plans backfire?

What if the asteroid remains on course and collides directly with the U.S. economy?

In this case, a lot can go wrong. Perhaps the president misjudges the inflationary impact of the current 125% tariffs on Chinese goods. That would force the U.S. Federal Reserve to tighten rates… triggering a showdown with President Trump. (It may seem like a year ago, but just on Monday, U.S. stocks fell around 3% over fears that President Trump could and would fire Fed Chair Jerome Powell.)

I wish we could tell you today which path we’re on.

It would save us all so much trouble to know whether the recession “asteroid” will hit… or not.

However, the international experience tells us that no one can predict what will happen next. We’ll begin seeing signs of Trump’s successes or failures in the coming months, but anyone saying they’re 100% confident today in the path is being disingenuous.

And that’s why we’re expecting the best while preparing for the worst – a theme we’ve revisited many times over the past few months.

That is why, in the Fry’s Investment Report portfolio, I’ve made sure my paid-up members are invested in high-growth tech leaders that should surge if American growth remains robust and valuations get back on track.

But I’ve also made sure we’re balancing this risk with countercyclical plays, including energy, international, and value stocks.

To learn more about the companies we’ve got our eyes on to help us survive – and thrive – through these volatile times, click here to learn how to become a member of Fry’s Investment Report today.

Our strategy: Magnificent Seven stocks are out, gold is in, and we’re quietly buying up well-priced stocks (particularly outside the U.S.) when the moments are right.

Until next week,

Tom Yeung

Markets Analyst, InvestorPlace