Isolationism and increasing inefficiency that results will continue to push output down. Already it has reduced investment, which in turn reduces productivity growth, as well as both exports and imports which account for about 40 – 45% of our economy. Let me illustrate how this works. Two nearby islands routinely trade with each other because island 1 has resources and technology better suited for making clothes while island 2 is more suited to making food. Each islands specializes by producing what it is relatively better at and then exports that good in exchange for imports from the other island. Consequently, both nations have plenty of food and clothes.

Assume now that a new leader on island 1 (that makes clothes) thinks that if it also made food and quit trading with the other nation it would be better off. To accomplish this, the new leader imposes 100% tariffs on food imports from island 2. Island 2 retaliates with 100% tariffs on imported clothes from island 1. As a consequence, island 1 now makes only clothes and has no food while island 2 has plenty of food but no new clothes. Island 1 needs food so all citizens unemployed are promptly hired to make food and the unemployment rate goes down. Same for island 2, all the unemployed are hired to make clothes and its unemployment rates goes down as well.

But output continues to shrink on both islands. Island 1 still needs more food and reallocates some individuals better at making clothes to making food. Not much more food is made but clothing output shrinks greatly. Island 2, doing the same, gains few clothes but decreases food production significantly.

So here we are. But wages continue to increase while productivity falls behind because of the lack of investment. Eventually, we must choose between higher unit labor costs, higher import prices and excessive inflation or a recession.

In the meantime, the stock market and economy continue on. No recession yet, anyway. Growth stocks to consider for the next 30 to 90 days are: SSL, HIBB, DVA, ENVA, and GPI. Dividend growth stocks are: AM, CNXM, DBI, MBT, SPKE, and VGR. The top ETFs are: EWT, VLUE, EWJ, IYW, VGT, and PSI. Good investing!