The American tailwind meets the Trump headwind
Years ago, legendary investor Warren Buffett started using the phrase “American Tailwind” to describe how American capitalism keeps creating value over the long term. “It is beyond arrogance for American businesses or individuals to boast that they have ‘done it alone’,” he wrote in his 2018 letter to Berkshire Hathaway shareholders. “We are lucky—gloriously lucky—to have that force at our back.”
I’ve had this tailwind—the product of American ingenuity and hard work combined with relative political and legal stability—at my investing back since 1998, when I first bought shares in Vanguard’s S&P 500 Index Fund. That passively-managed fund, one of Vanguard founder Jack Bogle‘s greatest gifts to retail investors, gives me a stake in 500 of the largest publicy-traded companies in America without getting hit with the capital-gains taxes that actively-traded funds regularly inflict on their investors.
And over the years, it’s done spectacularly well. In just the last decade, that Vanguard fund, which is the bulk of both my retirement holdings as well as my everyday investments, has averaged a 12.46% annual return.
Which makes it all the more disheartening to see that since Jan. 20, my combined Vanguard holdings are down about 14%.
Much of that loss has come in the last week, thanks to President Trump’s economically illiterate decision to impose “the largest tariff increase in a century,” with rates calculated in a “bizarre, slapdash way” that will translate to a tax increase on American customers that could rank as “one of the largest in U.S. history.” Over time, this disastrous policy prescription risks “the gradual erosion of U.S. competitiveness” and represents “a strategic gift” to China.
(All of the disapproving quotes in the paragraph above come from the hotbed of neo-Marxist thought that is the editorial board of the Wall Street Journal.)
I remain an optimist in the American tailwind in the long term, but that’s easy for me to say when I don’t plan on retiring (what does that even mean when you write for a living?) until maybe 15 years from now. We have been through worse, even in the last decade.
But those other bad times, like March of 2020, were hard-to-avoid consequences of things happening far beyond Washington. This week’s market crash is the direct result of American voters placing much of the machinery of government–a thing that Buffett counted on as a stable framework for capitalist growth–in the hands of an empathy-devoid man who seems to wake up every morning looking for somebody new to punish, and who finds near-zero resistance to his uninformed whims among members of his own party.
The predictable result: Trump’s agenda of resentment and retribution, having already bent constitutional guardrails, is now taking a hammer to Americans’ personal wealth. And remember this: We the people could have chosen not to lurch into this experiment in national self-harm.
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