We're back. We are finally back.

Since Trump's Inauguration in January, the markets have been on a roller coaster ride. At first, we were experiencing the Trump Bump since November 5th. The S&P 500 went from 5,700 to as high as 6,144. The new Administration was welcomed by investors.

But now we are back to the prior Administration index levels. What does this mean for investors? On the surface, investors took their gains. You don't need to look deeper than that. In fact, these rallies and declines are common during Election years. The market peaked a few weeks after the inauguration. The Trump Bump rally lived well past my expectations.

When to Buy or Sell Value

This market will be hard to predict. As an investor, you have two choices. Either you buy the index and hold throughout market volatility; or you are better off finding individual high growth names.

The latter will require more risk & portfolio management. Most investors are not equipped to handle a more active portfolio. It's a lot of work. Plus you are competing with the best investment managers. So if you make an individual investment position, you need to know it very well.

One mistake investors make most often is replacing stock price for value. Valuing a business is hard work. It requires you to analyze the balance sheet, earnings power and the industry. There are several moving parts, and a valuation is only a snapshot in time. You need to update your model when times changes.

The stock price on the other hand, is the price Mr. Market gives you everyday. Sometimes it's cheap, sometimes it's expensive. Fortunately, you as an investor when you buy or sell stock.

There are different ways to value stocks, so you need to choose the model most familiar with you. Discounting cash flows and comparing valuation multiples are the most common ways I've seen for a stock.

We are entering a new phase of the cycle

Trump 2.0 has an X-factor we haven't seen in decades: DOGE. The Department of Government Efficiency is unlocking a new form of capital in the markets.

You see, in prior years, the government would spend its way out of hard problems. Which is why we have an annual deficit nearing $2 trillion. This is a massive amount and growing. The problem is the U.S. government has no plans to stabilize our country's constant spending. This will lead our nation to bankruptcy.

So over the next nine months, until September, the Trump Administration is hyper focused on cutting the current spending budget by $1 trillion.

At first, I was surprised to read this. Elon and his team are only working to solve half of the spending problem. But when you step back and look at the whole problem, you'll notice that the governmental antibodies (i.e. political parties) are very aggressive when it comes to spending cuts. Their gravy train is coming to an end.

The challenge investors are facing now is that fiscal and monetary policy are facing off each other. Government employees are being let go and reentering the private workforce. One trillion dollars of savings will go from unproductive to very productive capital. There are talks of providing American citizens with a Doge Dividend as well.

Scott Bessent is the current Treasury Secretary and has a tight handle on our country's spending initiatives. One of his objectives is to reduce the need for excess government financing. Which means he wants to keep interest rates down, without the Federal Reserve's inputs. And it's working.

So the best way to manage volatility will be to hold your positions steady. A lot of popular, high-growth stocks will watch their valuation retract during this period. Most of the money will be reallocated into more stable names or index funds. At the moment, I would be cautious about investing in government & defense tech related businesses. Those stocks are most vulnerable to significant cuts in revenue this year.