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Investment Commentary

photoNovem­ber 9, 2016

Fear and Loathing

Robert Brooke Zevin, Chair­man, Senior Port­fo­lio Manager

The elec­tion results have brought many of us to despair and fore­bod­ing. Are we now doomed to back­slide on dis­crim­i­na­tion against women, eth­nic and reli­gious minori­ties, immi­grants, the LGBTQ com­mu­nity, per­haps any­one in the world who is not a white, male, Chris­t­ian Amer­i­can? The answer to this ques­tion is nei­ther yes nor no. Many of these ugly trends have already been under way for decades: under­min­ing Roe v. Wade and the Supreme Court itself, killing the Vot­ing Rights Act, turn­ing Amer­ica into a coun­try where there are more guns than peo­ple, mil­i­ta­riz­ing local police forces, and incar­cer­at­ing mil­lions of young men and women for non-​violent crimes. All of this is con­tested ter­ri­tory. Yes­ter­day was a big defeat, but not the end of the struggle.

It is tempt­ing to extend our moral out­rage about what Don­ald Trump has said and done into a gloomy fore­cast of what we can antic­i­pate from his for­eign and domes­tic pri­or­i­ties. How­ever, once in office, pres­i­dents often do not do what they have promised, and Trump’s promises are par­tic­u­larly vague and incon­stant. Nev­er­the­less, he is very likely to make our bad poli­cies toward immi­grants and peo­ple of color even worse and unwind envi­ron­men­tal con­trols. And he will give the world another push in the direc­tion of less inter­na­tional coop­er­a­tion and trade, a direc­tion in which the world has already been going for the past six or seven years. And while U.S. mil­i­tary activ­ity might decrease, spend­ing on desta­bi­liz­ing “mod­ern­iza­tion” of nuclear weapons could accel­er­ate even more.

In any case, stock mar­kets are largely amoral and unpa­tri­otic. As always, finan­cial mar­kets will be focused first on the imme­di­ate prospects for cor­po­rate prof­its and div­i­dends. The mar­kets con­sider human rights and ecol­ogy pri­mar­ily when they are per­ceived to threaten the main­te­nance of those prof­its and div­i­dends. There is lit­tle in Trump’s mean­der­ing speeches that sig­nal a threat to cor­po­rate prof­itabil­ity. And the prospect of one party con­trol­ling the White House and both houses of Con­gress holds out some hope that, for the first time since 2008 and one of the few times in recent decades, our gov­ern­ment may be in a posi­tion to respond quickly to the next reces­sion with a pro­gram of fis­cal stimulus.

A Trump admin­is­tra­tion will likely block or slow cer­tain efforts to address some of our country’s social and envi­ron­men­tal prob­lems. Reg­u­la­tory agen­cies will be become less ambi­tious or else run into (even more) polit­i­cal inter­fer­ence. The pric­ing of car­bon pol­lu­tion will not move for­ward and Trump is likely to unwind the Obama administration’s Clean Power Plan address­ing util­ity emis­sions. But a Trump admin­is­tra­tion may not sur­ren­der every­thing to cor­po­rate greed. We might even see repa­tri­a­tion of cor­po­rate cash from over­seas and a gate on the revolv­ing door between fed­eral employ­ees and lobbyists.

We believe our work is even more impor­tant in this new world. U.S. com­pa­nies will still be expected to do their share in decreas­ing global car­bon emis­sions as agreed by nearly every nation at the Paris cli­mate con­fer­ence. After this pop­ulist elec­tion, firms that employ mil­lions of low-​income Amer­i­cans have even more rea­son to pay a liv­ing wage and help end cycles of dis­crim­i­na­tory hir­ing. And in a laissez-​faire fed­eral pol­icy envi­ron­ment, we will hold com­pa­nies to use their polit­i­cal voices con­struc­tively at the state levels—rather than lobby for less regulation.

In the wake of this unset­tling elec­tion out­come, we will con­tinue to closely mon­i­tor devel­op­ments as Trump assem­bles his cab­i­net and pro­vides more hints of poten­tial poli­cies. Our invest­ment approach con­tin­ues to focus on long-​term cap­i­tal appre­ci­a­tion and loss avoid­ance. In this con­text, we believe that own­ing stocks in high-​quality, competitively-​advantaged com­pa­nies with a his­tory of steady earn­ings growth and reli­able div­i­dend streams remains an appro­pri­ate strategy.

Robert has been a leader in socially respon­si­ble invest­ing since his pio­neer­ing work in SRI forty six years ago. He is cur­rently Chair­man of Zevin Asset Man­age­ment and has held var­i­ous senior posi­tions at the for­mer United States Trust Com­pany of Boston. In the 1960s Robert was also a pio­neer in the use of Mod­ern Port­fo­lio The­ory and com­puter tech­nol­ogy applied to invest­ment deci­sion making.