November 9, 2016
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.