Letter to Stakeholders, April 2025

Wednesday, April 9, 3:45 pm EST. Last month I wrote that the stock market reacts violently to short-term instability. Over the early days of this month, that has proven true. Stephen Covey’s famous “7 Habits for Highly Effective People,” are foundational principles designed to help us lead effective lives. The 5^th habit, “Seek first to understand then to be understood,” is my forever challenge as a student of our economy and practitioner of financial planning. In April of 2025, what exactly is happening in our economy? How did we get here? What’s really going on? 

1944 & 2025?

In November of 2023, I wrote briefly about the then “new” international monetary system called the Bretton Woods Agreement created in July of 1944. Representatives from 44 countries met in Bretton Woods, New Hampshire to establish the International Monetary Fund (IMF) and the World Bank Group. The goal was to promote international economic growth through stabilizing currencies. The U.S. dollar was “pegged” to gold and by 1958, all other currencies were pegged (or tied) to the U.S. dollar value. The summer of 1944 was a significant time for the world and the United States. World War II was ending. In June of 1944 allied troops liberated Rome, landed on the beaches of Normandy and in July assisted the Soviets in defeating Germany. Two years earlier in 1942, our Federal Reserve Bank committed to maintaining low interest rates on government bonds to finance the war efforts. This was the backdrop for the meeting at Bretton Woods. Establishing the U.S. dollar as the stable, reserve currency of the world helped reduce the cost of rebuilding Europe and developing other countries. In addition to rebuilding other countries, the US created “New Markets and Industries.”

Our gold-backed reserve currency (U.S dollar) worked but not perfectly. There were ever reducing supplies of gold, increasing U.S trade deficits and unstainable increases in the supply of dollars. It was the perfect alchemy for what’s now known as the Triffin Dilemma: as a reserve currency country runs deficits (as ours did) the stability of its currency comes into question and its reserve currency status is threatened. With rising inflation threatening, President Nixon took our currency off of the gold standard in 1971. 

Since 1944, there have been few attempts to bring the largest countries/economies together to collectively negotiate currency valuations. Other than the 1985 Plaza Accord, currencies have been based on free floating exchange rates.  It is the international economic order of trade and security that this administration would like to change.

Mar-a-Lago Accord

As I write this the stock market is surging. This is in sharp contrast to the market declines of the past few trading days. The Administration has decided to adjust its international tariff policy; temporarily reducing tariffs to 10% on every country except China. What the markets interpret as indecisive policy could be part of a long-term plan. 

The so called “Mar-a-Lago Accord,” was the brainchild of former Hudson Bay Capital Strategist Stephen Miran who is now the Chairman of Economic Advisors (CEA) at the White House. The CEA is tasked with advising the POTUS on “domestic and international economic policy.” Miran has done that with a 41-page document titled “A User’s Guide to Restructuring the Global Trading System.”  In this document you will see elements of the trade policy that has perhaps, not-so-randomly been implemented. You will hear echoes of Treasury Secretary Scott Bessent’s comments on how the economic system should change and the so-called “adjustment process.”

Miran’s document can best be summarized as an attempt to offset non-trade barriers in place for decades against the United States; particularly currency manipulation. And as in 1944, 1971, and 1985 the chief aim seems to be about retaining the U.S dollar as the reserve currency of the world. US opponents like China and Russia would prefer another currency take the lead. And round and round the international arm wrestling continues.

Your Portfolio and Your Plan

As mentioned last month, you have a diversified portfolio made to buffer market fluctuations (even violent ones). If it moves enough, we will trade on it. We were close to doing so this week. For best results, we reallocate after a 20% portfolio move.  

I don’t know if the markets will be violent tomorrow or the next day. I agree with asset managers like CEO Mark Rowan of Apollo that policy could have been implemented differently. Regardless, we’ll keep studying the situation and when needed, take action. 

Jason J. Howell, CFP®, CPWA®, CSRIC® 

President

Jason Howell Company is a family wealth management firm that strengthens the finances of families making the transition from first generation success to family wealth. We envision a world where wealthy families give, grow and govern themselves in ways that enrich their local communities. We do this by reducing the fear, isolation and guilt associated with financial success.

Jason J. Howell, CFP®, CPWA®, CSRIC® and Douglas W. Tees, MBA, CFP® CAP®, CBDA  have spent a lot of time in the Washington, DC area, and are aware that many people who are first generation wealth suffer from a kind of "financial imposter syndrome."  Successful entrepreneurs and family businesses are always looking over their shoulder; government contractors worry about the next contract; former Capitol Hill staffers privately wonder if they should "feel bad" for the money they now make. Imposter syndrome is common among people who work for the many corporate headquarters based in this area as well. These feelings get in the way of properly managing family wealth. We empower them to get organized, build a team of advisors and make decisions.

Our typical "first generation wealth" families include dual income parents who work, save and have just the right amount of fun. For long-time, family owned businesses we focus on much family preservation as we do wealth preservation. 

First generation wealth success stories and family business owners realize that they:

• Need to “do something” with the cash in their checking/savings
• Need to eventually diversify their portfolio away from the family business
• Need an investment strategy for “up” and “down” markets
• Need a plan to mitigate market, credit, inflation, and political risks
• Need to start tax planning instead of just tax paying
• Need to be sure they are choosing the right work benefits
• Need to reduce financial miscommunications between family members
• Need to separate business finances from personal finances
• Need to separate family wealth from individual wealth
• Need a plan to provide space for both family and individual philanthropy 
• Need to plan for money while alive and for what happens after death