Steve Sosnick, Chief Strategist at Interactive Brokers (IBKR), spoke with Quartz for the latest installment of our “Smart Investing” video series.
Watch the interview above and check out the transcript below. The transcript of this conversation has been lightly edited for length and clarity.
ANDY MILLS (AM): – There’s a lot of rhetoric coming from President-elect Donald Trump about tariffs. Should investors take this seriously? How could they prepare? Should they be worried at all about this wild talk?
STEVE SOSNICK (SS): I think we’re already seen the wild talk, but you had four years to prepare for this because I think we’ve kind of forgotten about it – and this is probably a bit more of concentrated amounts of wild stuff than we had in the first administration – we’ve seen this before. We would get the late night tweets out of no place with stream of consciousness. And I do believe that a lot of the incoming president believes that a lot of times be unpredictable and that’s a bargaining chip of his, is his unpredictability. So it’s very hard to know what needs to be discounted and what needs to be considered policy. I don’t want to overreact to any single thing. On the other hand, I do have to worry that I don’t know that it’s necessarily helpful to start antagonizing some of our closest allies and some of our neighbors. If you want to annex Canada or whatever, they don’t wanna be part of the US. And, by the way, they supply most of our energy so they could make our life pretty miserable, too. So there’s a lot. I think one of the reasons is Trump does not love the fact that Canada has a trade surplus with the US but it’s because we buy a lot of things that we need from them, which is basically energy and raw materials. Annex Greenland? Does saying that matter too much? Probably not. But I think if I’m a foreigner looking to invest in the US or buy our debt, I have to wonder, do I? Does this seem as much of a layup as it used to be?
AM: Yeah. Taking the Panama Canal back? I saw that. And then changing the Gulf of Mexico to the Gulf of America?
SS: Yeah. We could go on. Yeah. And some of it is cosmetic. You wanna call it the Gulf of America? It doesn’t really change things. You want to antagonize Mexico to some extent where we have very important trade partnerships? That’s a bit of a different story. And that’s where I think a lot of this… it’s impossible to know right now how much of the tariff talk, how much of the other talk is laying out a bargaining position vis-a-vis actual policy pronouncements. And I think that unpredictability is just gonna be something we have to live with. And it’s very important to remember equity investors are notoriously terrible at geopolitics. It’s just not there. Equity investors are really good about things that affect earnings, cash flows, sales, that kind of thing. They’re not so good about geopolitics. Watch the bond market, which again, they’re hyperfocused on the cost of money and deficit, financing deficits. Also, watch commodity markets, particularly oil, because oil is pure geopolitics. And so those are the things I watch for in terms of how I take my lead for what markets are thinking about geopolitically.
