I hope Insight readers will forgive us if this edition is a little (or a lot) shorter than usual—though some of you might actually celebrate the brevity! The Altus team is crushed busy right now between trying to get all the investor 2024 tax returns out the door, while also trying to close on the purchase of seven property acquisitions and two property sales—all within the month of February. This activity is awesome, and we are really excited about the transactions, but the hours are long and intense, so some things, like a more euphuistic Altus Insight, are the trade-off.
In January, Trump’s approval rating reached 52%. This was higher than at any point in his first term. This surge in support reflects a broader sentiment among many Americans a desire for disruption and change within government. As someone who has had to work through various government agencies, I fully understand the waste and ridiculousness of many areas of the government. Changing the inertia (an object at rest will stay at rest) is quite difficult to do, so it makes sense it would take a major disrupter to actually make meaningful changes. It is also hard to argue with efforts towards streamlining government operations and pursuing diplomatic resolutions, even if the approach is foreign and alarming to our sensibilities.
But… there are severe lessons from the last administration and how the Democratic party approached governance that very obviously were not learned by the new administration nor what remains of the Republican party. The current administration is taking the very things that resulted in a Republican wave in recent elections and amplifying its force. Efforts to destroy lives, claiming free speech while coming down on speech they don’t like, and attacking the judiciary (to the point of impeachment efforts) … the list goes on.
There have been times during my adult (voting) life when I have been concerned about the party in power trying to destroy the structure of the government guardrails to enshrine their power (for instance, efforts by the Democrats to increase the size of the Supreme Court so they could “stack the court”), but I think as an American citizen I have never been as concerned as I am currently.
As a business owner and investor, I also have concerns:
- If you read the news articles and plethora of tweets, there will be billions of dollars in savings from the cuts to government. Trillions across years of savings. From a fiscal responsibility standpoint, I am a huge fan of this long term, as was discussed in the November Altus Insight. However, there is no question that those billions/trillions being “saved” won’t have an impact on the economy in the short run. It will take time for the talented people affected by these cuts to find new work and be able to contribute to economic growth. It will take time for the real estate to be repurposed. Etc. The long-term benefits are clear. The short-term pain (investment) is obviously intense on those personally impacted. We don’t yet know how intense it will be for the economy at large.
There are varying opinions about tariffs. In the multiplayer game that is the world economy, those opinions can be strongly held, but nearly impossible to prove as truth. My personal opinion is trade should be fair and equal. If that means no tariffs between two trading partners, great. If it means equivalent tariffs between two trading partners, fine. But what we have currently is massive uncertainty about the use of tariffs. Will they go into place? Are they just a blunt negotiating tool? How large will they ultimately be? These are important questions. Companies are hesitant to commit to long-term capital projects without clear trade policy direction. - When Trump was originally elected the stock market rallied and business optimism soared. There was an assumption that the next four years would either be business-friendly or, at worst, status quo. Instead, we have entered an era of heightened uncertainty, leading many businesses (Apple not withstanding) to pause long-term investment decisions. In our own business, we saw a spike of leasing interest from retailers and large industrial space users. That downside case of status quo has been blown to smithereens and uncertainty is reigning supreme. That same increase in leasing interest has largely abated, and our activity – anecdotally – is back to where it was pre-election, or even slower. Some of this uncertainty and unwillingness to invest in the future is tied to the expectation of economic impact of DOGE, but much of it is due to the tariff uncertainties.
- One reason Trump and the Republicans had such a strong showing in the election was that many voters felt the political pendulum had swung too far to the left extremes. Voters in the middle were left alienated and disgusted, so they went with the only other option available to them. Now, it isn’t just what the current administration is doing, but also how they are doing it, that is rapidly swinging the pendulum to the political extremes on the other end of the spectrum. This almost certainly means we will have a counter backlash from voters in 2026, and likely in 2028. The 2026 backlash will result in a divided government, which from an investing and business standpoint, I believe to be best. But come 2028, we could end up back to far-left extremes again as a reaction against the craziness we are seeing right now. The afore-mentioned favorability around Trump has already started to erode (and rapidly). From the January high, Trump’s net favorability rating (positive percentage minus negative percentage) has declined from a positive 8% to basically neutral, all within just one month. This kind of governance whiplash means many of the decisions we are making now based on what is happening today, may not be good decisions in four years. Four years is a very short amount of time in business and only a slightly shorter amount of time in investing. As investors and business owners we need to be really careful not to end up in a situation where a political snapback leaves us stranded.
There is no question these are interesting times—or, as the title suggests, even crazy times. As business owners and investors, what are we to do? I can only speak for Altus, but I know from a business perspective we are focused on operational excellence. It may not be sexy, but it never goes out of favor. From an investing perspective we are sticking even tighter to the basics. Prioritizing low intrinsic cost bases, focusing on risk-adjusted returns, and investing in assets that can perform across changes in political regimes.
On the flip side, while uncertainty breeds caution, it also breeds opportunity. Those who remain patient, disciplined, and committed to fundamentals—but willing and able to move quickly when warranted – will be in the best position to succeed no matter which way the political winds blow.
Happy Investing.
