Listen and subscribe to Stocks In Translation on Apple Podcasts, Spotify, or wherever you find your favorite podcast
Since President Trump’s inauguration, the market has become increasingly more volatile due to the commander in chief’s tariff implementation, Elon Musk’s Department of Government Efficiency mitigation of government spending, and a looming government shutdown, just to name a few.
In this clip from the latest episode of Stocks in Translation, J.P. Morgan Asset Management global market strategist Stephanie Aliaga joins Markets and Data Editor Jared Blikre and Yahoo Finance Anchor Madison Mills to discuss policy uncertainty and how investors should navigate different variables coming from Washington, D.C. that could impact their portfolios.
Aliaga refers to an analogy that Federal Reserve Chair Jerome Powell once used, and that is ‘driving through the fog of uncertainty’. “[The Fed] knows the road they’re on, they know the direction they’re on - and that one’s a pretty good road. It’s one the economy is still growing at, or maybe slightly above its trend GDP growth rate, inflation coming down. But there’s this fog of uncertainty. What do you do in the midst of the fog? You slow down a little bit. That’s what the Fed is doing. They’re on hold likely until the summer at least. For investors, we have to decide how we position in the midst of the fog given that there’s upside and there’s downside risk,” Aliaga explains. “I think the way investors are positioning is quite notable. That is leaning into diversification, checking your headlights, checking your brakes in the midst of the storm. How are you protected or potentially can benefit from the way the chips fall?”
Policy uncertainty itself can be a tool. So there can be upside, there can be downside. Uh, we tend to focus on the downside and the risks more, but tell me what you think about it.
Absolutely. I'll use an analogy that Powell himself used at the December Fed meeting, was that the Fed thinks that they're driving through this fog of uncertainty. They know the road that they're on. They know the direction they're on, and that one, it's a pretty good road. It's one of the economy still growing at or maybe slightly above its trend GDP growth rate, inflation coming down, but there's this fog of uncertainty. What do you do in the midst of the fog? You slow down a little bit. That's what the Fed is doing. They're on hold likely until the summer at least. For investors, we have to decide how do we position in the midst of fog, given that there's upside and there's downside risk exactly to your point. The upside risk, maybe we get more deregulation, maybe that that that is shown to be quite productivity enhancing. It could also be enhancing for many sectors of the market, particularly financials, industrials, etc. But lately, particularly in the last few weeks, what's been incredibly foggy, uh, and worrisome in some ways, has just been the storm of tariff announcements that we have seen. Um, a lot of action from, uh, the Department of Government Efficiency Dodge, and it's really hard to get reputable or credible or get a sense of the numbers around what has been done and what is going to be done on deficit spending. And then, and then you also have the uncertainties further down the road on the fiscal front, the reconciliation bill. How does all of this net out? Really remains to be seen. Uh, it will be a fun year to to kind of be watching the markets. But I think the way investors are positioning is is quite notable in that leaning into diversification, you know, checking your headlights, checking your brakes in the midst of a storm. How are you protected or potentially can benefit from the way that the chips fall?
Yes, please.
Crystal ball.
Related Videos
To hear more of Aliaga’s thoughts, watch the full interview here.
Twice a week, Stocks In Translation cuts through the market mayhem, noisy numbers and hyperbole to give you the information you need to make the right trade for your portfolio. You can find more episodes here, or watch on your favorite streaming service.
This article was written by Lauren Pokedoff