Yuck

September already. Let’s take stock.

The last eight months have been hard to swallow. Trudeau out. Carney in. Freeland fizzled. Elbows up. Trump in. 51st state. Tariffs. Liberation Day. Wars, Putin, Gaza, Zelensky, Netanyahu, Iran. Election. Poilievre seatless, then resurrected. TACO. Nvidia. Mag 7. AI. Rigged jobs data. And every single day for seven months we wake up and wonder – ‘what did he do now?’

Through it all financial markets have outperformed. In the States the benchmark S&P 500 is ahead 10% in 2025 and 16.8% above where it was twelve months ago this weekend. The Dow lags with a 7.5% advance year-to-date and a 12-month gain of 11.2%. The tech heavy Nasdaq has advanced 11% this year and 25% since last August. And on Bay Street the Canadian stock market has jumped 14.7% in 2025 and 24% in twelve months.

During this year also recall that global stock markets crapped out in April with the S&P pushed down to bear-levels after Tariff Man unveiled his master plan. But the spectacular recovery came despite warnings that 1930s-stye tariffs would stoke inflation and bring recession while mass US deportations would cause turmoil, labour shortages and economic decline. Meanwhile Congress passed legislation dropping taxes on billionaires and cutting health care for the working poor while the world’s richest man was gutting the Washington bureaucracy, American foreign aid was cut off, vaccines restricted and red states redrew electoral borders to ensure Trump keeps winning.

Whew. This is exhausting. But nothing may have a longer impact than the thing we discussed yesterday. The Fed.

That got Darren’s interest.

“I read with interest your article and blog post of August 31 where you talk about the Trump administration taking over the Fed. In particular this paragraph I found very insightful.” He says.

“Mayhem. An economic crisis. Market turmoil. A big drop in the US$. The bond market would have a cow. The price of longer-term debt would fall and yields jump as investors demanded protection from the inflation tsunami that Trump would launch.”

“I have been a long time, follower of yours and am looking for some guidance on what to do before May of next year assuming that Powell will be forced to leave by then. I am currently diversified and balanced with investments, mostly in balanced ETFs and recently retired so I’m looking for what changes if any I would need to take. You advise to stay balanced and diversified and I am glad that I am but in lieu of this significant pending change. I’m wondering what I might need to do beforehand.”

It’s true. If the US central bank is politicized (which is happening) and interest rates are forced lower as a result (seems likely) most sane people expect the result will be inflation. Prices will rise. Borrowing will increase. Asset values will inflate. As a wave of monetary stimulus flows over the world’s biggest economy, the US dollar will weaken and tariffs grow more muted. Bond investors will want protection, so as short-term rates are dropped (forced down by the Fed), long-term yields will rise and debt prices decline.

What to expect then?

Many investors expect a surge in equity values as corporate borrowing costs will fall – especially beneficial for leveraged tech companies – and since Trump’s domestic policy bill permanently reduced the corporate tax burden. On the flip side, US real estate will come under pressure since 30-year mortgages (the norm) are priced on long-term bonds, where yields will probably increase (on those inflation worries).

In Canada, the opposite. Our central bank follows the Fed more than 90% of the time, so a drop in rates here is also anticipated. Canadian mortgage rates reflect shorter-term bond yields (five years, instead of thirty) and generally move lower with the prime. Next year, in short, could bring a housing revival.

And what of Darren’s worries?

He should chill. Unknown is whether Trump will dominate the Fed, or not. Even if he does, a bond market revolt could bring an abrupt policy change. If 2025 taught us anything so far, it’s that a balanced and diversified approach is the best defense against a rogue president, geopolitical turmoil, volatility and massive political unpredictability. People who sold in fear eight months ago made a big mistake. Those who bailed as markets sank in the spring took a loss for nothing. And investors fleeing now as the Fed is targeted risk the same fate.

These are precisely the times when a B&D approach shines through. Don’t bail out of US exposure, Darren. Don’t dump fixed income. Just stay the course in retirement with a 60-40 mix and the same equity weightings to Canada, the USA and international. Don’t look at your portfolio every day. Never watch BNN. Stay away from Yahoo Finance. And reconsider being a DIY investor – now that you have far less time to recover from any bad, emotional decision.

Maybe even stop reading this pathetic blog. I would.

About the picture: “Please see attached photo of ‘Crosby’,” writes Christopher.  “Yes, he is named after Sidney Crosby. He is our sweet rescue dog.”

To be in touch or send a picture of your beast,, email to ‘garth@garth.ca’.

Source: https://www.greaterfool.ca/2025/09/01/yuck-2/