Politics and investing don’t mix
Presidential candidates see bubbles everywhere. If you took investment advice from them you would hide your money in the safe. Political biases and investing don’t mix well. I don’t pick favorites and I put little weight behind what the candidates say. A popular sales technique that is used in the insurance business is to create fear to make a sale. The product pusher will warn that an event is about to happen, and the economy is going into recession, so you better buy this product to protect your wealth. Many annuity sales have been made this way. This is really no different from a candidate saying that the economy is going into a black hole, you better vote for me. We all know that once a candidate gains office, they will do what is in their best interest to remain in office.
Policies and taxes do shape the economy and there are some very strong arguments for which candidate will do better a job. However, market forces are now global and central banks control the money supply and the level of interest rates. Liquidity has the biggest influence on the markets. After 2008, governments no longer have the political capital to stimulate the economy through fiscal policy. The easy Federal Reserve monetary policy has been a big part of the reasons why markets rallied. It could be no coincidence that the markets stopped going up when the Federal Reserve ended its liquidity program in 2014.
I spent a large part of my career working alongside portfolio managers for the largest mutual funds. In 2009, while I was at Pioneer Investments, a manager with a 30-year track record hit a rough performance stretch. The lesson he learned was to keep a closer eye on what was happening in Washington. Monitoring policy decisions matter much more if you are buying individual stocks. For instance, just last week, Pfizer and Allergen ended a $160 billion merger because the Treasury changed the rule on making it impossible for US companies to merge with an overseas company just to save on taxes. If you held a well-diversified portfolio, this rule change had little impact on the change in your wealth.
Making investment predictions based on which candidate will do a better job for economy is a difficult game to play. Each candidate has their own way of saying one thing and then doing another. I believe that monitoring corporate earnings, valuation levels, and market sentiment, are better ways to draw investment conclusions.
If you would like to speak with me about building a diversified portfolio through customized portfolio management that aligns your risk tolerance with your financial goals, feel free to send an email to mitch@cgfadvisor.com.
Please read our disclosure statement regarding the contents of this post and our website as a whole.
Advisory services offered through Constant Guidance Financial LLC, a registered investment adviser.
