Markets are trading at new highs despite the disruptive impact of ongoing trade negotiations. Or is it because of them? In my experience, robust markets have correlated with periods of uncertainty, shock and disruption. Consider the recent post-Covid rally and this year’s recovery post Liberation Day. Further back, we also saw this following the Global Financial Crisis. At the time, I had many conversations with professional investors who distrusted stock’s upward move, complaining that the government was “kicking the can” and pushing problems into the future rather than resolving them. In all three instances, stocks rose as investors remained fearful. The Wall Street adage “climbing a wall of worry” captures this idea but more interesting is trying to tease out the psychological feature that makes it happen. I will put it this way: Today’s skeptics are tomorrow’s buyers. Note, I am not talking about perma-sceptics. They are never involved in equities and are therefore not relevant to price action. Rather, I mean the group first reacting to scary media headlines and then later letting higher prices give them the all-clear signal. How can we take advantage of this phenomenon? First, don’t be one of those people. Second, focus on individual company fundamentals rather than top-down considerations (which are not predictable, at least not by anyone I know). Lastly, recognize that the cycle of worry is a mechanism that serves, after a time, to eventually drive stock prices higher. Incidentally, the examples I have provided are at the market-level but I have also witnessed this worry-cycle working on individual stocks on many occasions.
But aren’t tariffs like incremental taxes and therefore bad for the economy?
I think the market has come around to the view that tariffs are a tool the administration is using to extract trade and non-trade concessions from U.S. allies and adversaries alike. Few professional investors believe the objective is to bring back low-value manufacturing to the U.S. This is not likely to happen. It’s also not particularly desirable as the U.S. doesn’t have the unutilized worker capacity to fill these hypothetical factory jobs that few Americans want. But that said, isn’t the very direct near-term impact from tariffs going to be higher prices for many goods in the U.S.? Yes. Furthermore, those higher prices are just now hitting in stores. It will be another four to six weeks before any reliable data is available regarding any effect on consumer spending. I keep reading in the media that “the consumer is spending despite tariffs.” We don’t know the impact yet, but it will become clearer soon
This brings us to the other big factor driving the market and the economy
It’s the AI productivity revolution! I am far from an expert in artificial intelligence, but it is nevertheless abundantly clear to me that AI’s promise is driving massive capital investment. It is currently creating jobs (although many are fearful that it will also destroy jobs, and some will be destroyed) but beyond the investment cycle and job creation, management teams with whom I speak are most excited about the potential productivity enhancements from these new tools. This is real. It’s happening. It’s probably transformational. It’s impact extends much further than a small number of tech companies. This is simply way more important than the price of imported sneakers or avocados. I think the market is correctly focused on this, while lingering worries about trade negotiations provide the incremental buyers to drive stocks higher. That’s why stocks are at all-time highs.
Recent videos and updates
I am spending most of the summer in France but recently traveled extensively in the U.S. Among my June travels, I attended my friend Vitaliy Katsenelson’s investment conference in Vail, CO. At the conference, I gave a talk on stock trading strategies that I developed through trial and error (mostly error) that I nevertheless believe have made me a better investor. Some of the principles are somewhat antithetical to value investing (espoused by many attendees at the conference), so I thought it would be fun to challenge everyone with these ideas. You can watch a condensed and edited version of my talk “Alpha Capture Inversions for Value Investors” on my YouTube channel.
Secondly, I recently recorded a podcast with Bogumil Barabowski, the host of Talking Billions. The genesis of the talk was to discuss a book I am working on. The book’s premise is to share entertaining episodes from my professional experience that illustrate corporate strategy gone wrong, malfeasance, or behind-the-scenes aspects of the investing industry, especially how companies use analysts to communicate to investors. I also bring everyone along on my journey which includes much falling on my face. Besides the book (let me know if you have a good agent) we spoke extensively about other investing topics, philosophy, psychology, launching a business and other good stuff. You can find the podcast on all the major platforms (Spotify, etc.) or if you prefer to watch a video, I’ve uploaded it to my YouTube channel as well. Thanks in advance for liking the videos!
*This is not a recommendation. Please consult your advisor for investment advice tailored to your risk tolerance and investment profile.
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John Zolidis
President & Founder
Quo Vadis Capital, Inc.
John.zolidis@quovadiscapital.com
Mr. Zolidis has more than 25 years’ experience as an equity analyst. In 2017 he founded Quo Vadis Capital, Inc., a Registered Investment Advisor (RIA) offering investment management for individuals and an idea service for professional investors. He is a frequent presenter at value investing conferences around the world and a guest lecturer at Columbia Business School. Prior to founding Quo Vadis, Mr. Zolidis was a sell-side analyst following the consumer sector. He also managed money in a buy-side role at a long-short equity fund over 2013-2014. He was named in the Wall Street Journal’s Best on the Street list in 2005. He was named a RETHINK retail Top Retail Expert for 2025. He started his career in finance in 1996 following degree studies in Philosophy at Kenyon College and the University of Oxford. Mr. Zolidis and works from New York, NY and Paris, France or wherever he has his laptop.
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