From Nixon’s Inflation to Trump’s Fed Pressure: Can Investors Survive the Short Term

"Even if you 'know' you’ll be right in the long term, being too wrong in the short term can take you out of the game."

This line sums up a harsh but essential truth we all face in markets, business, and life—being wrong for the right reasons can be detrimental.

It’s essentially the Keynes line: “Markets can stay irrational longer than you can stay solvent.”

Now imagine this: you knew with 100% certainty that stocks would fall 50% in the next decade. Do you sell today and wait? Or hold and ride it out? What if that certainty drops to 90%… 70%… 50%? Suddenly the question isn’t about being right—it’s about surviving long enough for ‘right’ to matter.

So how do we think about today and make sure we stay in the game? The answer, as always, starts with history.

Nixon and the Fed

Policies pursued for short-term gain can carry costly long-term consequences—an enduring lesson from the Nixon era.

• In the late 1960s and early 1970s, facing sluggish growth and an impending election, President Nixon leaned on Fed Chair Arthur Burns to loosen monetary policy. Burns complied, and interest rates dropped about 4 percentage points from 1970 to 1972, while the 10-year Treasury yield fell more than 2.5 percentage points. Nixon enjoyed a short-term win, winning reelection handily.
• But the victory came at a steep price: inflation soared from 3.3% in 1972 to 6.2% in 1973 and 11.0% in 1974. Nixon's decision to suspend the dollar’s gold convertibility in 1971 triggered the collapse of Bretton Woods, with broad market implications. The economy fell into stagflation. Stocks crashed nearly 50% in the 1973–74 bear market, unemployment rose (and got worse later), and inflation remained entrenched.
• The cleanup fell to Fed Chair Paul Volcker, who in 1979 raised rates to nearly 20% to crush inflation—but that steep medicine came with a painful early-1980s recession. However, it restored credibility and set the stage for the strong economic expansion that followed.

Lesson: short-term boosting policies can lead to long-term instability. Sometimes enduring short-term pain is the wiser path to long-term health.

Today’s Test: Trump and the Fed

Fast forward to 2025. President Trump—now back in office—is once again pressing the Fed. Critics warn he’s repeating Nixon’s playbook.

• He has publicly pressured Chair Jerome Powell to cut interest rates, even exploring whether he could remove him—an action many legal experts say is unlawful.
• Most recently, Trump attempted to fire Fed Governor Lisa Cook, citing alleged mortgage fraud from 2021. Cook denied wrongdoing and has vowed to challenge the firing in court—arguing Trump lacks legal authority to remove her "for cause."
• Market reaction so far: muted. Stocks rose, the dollar softened, and gold rallied—possibly reflecting investor unease over politicizing monetary policy.
• Globally, central bankers are watching closely. They see a threat: if the Fed's independence erodes, it undermines the foundation of macroeconomic stability worldwide.

Modern echo: just as Nixon’s political meddling led to instability, Trump’s aggressive stance poses a risk to long-term Fed credibility and market trust—though the outcome remains undecided.

For Investors Today: Holding the Center

This historical parallel is not merely academic—it is a call to action.

• Prepare for multiple paths. Whether the Fed resists or yields, both outcomes create risks: inflationary pressures or credibility loss (if Trump succeeds), or short-term tightening or volatility (if the Fed resists politics).
• Balance safety and growth. Cash and ultra-safe assets sound prudent—but inflation and taxes can quietly destroy real purchasing power. Growth assets build wealth—but can drop sharply when markets turn.
• Defensive tools matter. Hedges like gold, commodities, crypto, options, or active strategies can help—but each carries its own risks. It’s not about “if,” but “how much.”
• Survival comes first. You can’t compound wealth over decades if your portfolio—or your mindset—doesn’t survive the short-term crises that will inevitably arise.

The CIO’s Dilemma

As the chief investment officer - CIO, this tension is more than theory — it’s my daily reality.

When policymakers push in one direction — whether it’s Nixon pressuring the Fed in the 1970s or today’s political influence on interest rates — the short-term effects can feel good. Growth ticks up, markets rally, portfolios benefit. But history reminds us that those same decisions can sow the seeds of long-term damage…IF…IF…IF…they materialize at all.

So what do I do? If we position portfolios only for the long term, we risk being “right too early.” Clients could suffer in the short run, lose patience, and walk away. As the saying goes, “I’d rather lose half my clients than lose half my clients’ money” — but, me personally, I don’t want to lose half my clients either.

This is the CIO’s paradox: being wrong for the right reasons in the short term can alienate investors. Yet blindly chasing short-term comfort risks permanent loss.

My answer is balance — not in the lazy sense of splitting the difference, but in intentionally building portfolios that can survive multiple paths:

• Resilience first: Protect against catastrophic, permanent loss of capital.
• Participation second: Ensure exposure to growth so clients don’t get left behind if markets march higher.
• Adaptability always: Use diversification, hedges, and flexible strategies to reduce the odds of being forced into a corner.

The goal isn’t to win every quarter but to always be able to play the game again next quarter. We seek to keep clients invested, compounding, and aligned with their long-term plan — without ignoring the political and economic realities that shape markets in the short run.

That’s what portfolio stewardship means to me: managing not just the money, but the experience of investing.

Survival today is what unlocks compounding tomorrow.

Investment strategies, including rebalancing, do not guarantee improved performance and involve risk, including potential loss of principal. Past performance does not guarantee future results.

The information provided is for educational and informational purposes only and does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor's particular investment objectives, strategies, tax status or investment horizon. 
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About the Author

Dane Czaplicki, CFA®

Dane Czaplicki is CEO of Members’ Wealth, a boutique wealth management firm that offers a comprehensive approach to serving individuals, families, business owners, and institutions. The firm’s goal is to preserve and grow its clients’ wealth to endure over time, while thoughtfully evolving its strategy to suit an ever-changing world. With over 20 years of wealth management experience, Dane and the Members' Wealth team thrive on bringing clarity and confidence to clients' unique situations. He believes everyone needs sound financial advice from someone whose interests are aligned with theirs, and is determined to put service before all else.

Dane received his MBA from The Wharton School of Business at the University of Pennsylvania and his bachelor’s degree from Bloomsburg University. Outside work, he enjoys spending time with his wife and kids, hiking and camping, reading, running, and playing with his dog. To learn more about Dane, connect with him on LinkedIn.

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