It seems that not a day goes by without a Tweet from our Commander in Chief that catches some people off guard. It’s a strategy, and its one that President Trump has consistently used. Even though he’s long relished making people guess, many people find him unpredictable. The fact is, his unpredictability is predictable.
Normal human nature seeks predictability. Stock market investors love predictability and hate uncertainty. After all stock prices are a reflection of investor expectations. So, when a very unpredictable variable is presented, e.g., the President in this case, it can be unsettling to investors.
As investors, one needs to keep in mind that there is a difference between headline uncertainty, e.g., the latest Presidential Tweet, and investment uncertainty.
This week I wrote in our letter to Market Outlook to clients about how political leanings influence our perception of economic growth. In other words, your political affiliation, whether Democrat leaning or Republican leaning, colors your view of how the economy is doing. When a Republican has been in the White House, Republicans believe the economy is doing well and the same is true for Democrats.
If you are already predisposed to a particular view, how can you make unbiased decisions about your investments?
This is one of the risks of getting caught up in the latest surprising headline and not discerning the actual impact on companies, earnings and stock prices. It’s just too easy for one’s own political perceptions to color one’s outlook.
Here in Massachusetts, where there are a few Democrats—okay, a lot of Democrats. Since November 2016 Rick and I have sometimes fielded concerns from clients who believe our economy and the stock market is at risk because of Trump. We have tried to help our clients understand that there is a difference between the latest headline and the underlying drivers of stock performance. It’s not easy to view this confusing situation with clear eyes (even for us sometimes) but that is what we focus on every day that we come to work.
Are you still worried about your investments in the age of Trump? Give us a call. We’re here to help.
Lyman H. Jackson
Financial Planning Solutions, LLC (FPS) is a Registered Investment Advisor. FPS provides this blog for informational and educational purposes only. Nothing in this blog should be considered investment, tax, or legal advice. FPS only renders personalized advice to each client after entering into an advisory relationship. Information herein includes opinions and forward-looking statements that may not come to pass. Information is derived from sources believed to be reliable. Information is at a point in time and subject to change without notice. Such information may not be independently verified by FPS. Please see important disclosures link at the bottom of this page.