{"id":6738,"date":"2024-10-27T05:32:45","date_gmt":"2024-10-27T05:32:45","guid":{"rendered":"https:\/\/finderica.com\/how-politics-can-ruin-your-portfolio\/"},"modified":"2024-10-27T05:32:45","modified_gmt":"2024-10-27T05:32:45","slug":"how-politics-can-ruin-your-portfolio","status":"publish","type":"post","link":"https:\/\/finderica.com\/?p=6738","title":{"rendered":"How Politics Can Ruin Your Portfolio"},"content":{"rendered":"
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Rarely in our nation\u2019s history have political views been more polarized \u2013 or more toxic.<\/p>\n

Political differences are inevitable, of course. But it\u2019s a mistake to turn bullish or bearish on the market based on which party is in power or who\u2019s in the White House.<\/p>\n

During the Obama years, for instance, I had several conservative friends who shunned stocks because of their strenuous opposition to Obama\u2019s policies on taxes, spending, regulations, healthcare, and debt.<\/p>\n

I opposed many of these Obama policies myself. But it didn\u2019t affect my view of the market.<\/p>\n

Good thing. During Obama\u2019s two terms, the S&P 500 Index returned 235%. (And our Oxford Club portfolios did far better.)<\/p>\n

And President Trump served through a rip-roaring bull market \u2013 one that was dealing with a pandemic at the time.<\/p>\n

Yet I have a number of progressive friends who missed the train entirely.<\/p>\n

Many point to what their favorite political pundits were saying before and after the 2016 election.<\/p>\n

In June of that year, for instance, former Clinton Treasury Secretary and Obama chief economist Larry Summers said, \u201cUnder Trump, I would expect a protracted recession\u2026 The damage would be felt far beyond the United States.\u201d<\/p>\n

In The New York Times<\/em> just before the election, MIT economics professor Simon Johnson heartily agreed, \u201cTrump would likely cause the stock market to crash and plunge the world into recession.\u201d<\/p>\n

Obama\u2019s former auto czar Steve Rattner said, \u201c[If] Trump wins you will see a market crash of historic proportions\u2026 The markets are terrified of him.\u201d<\/p>\n

Not to be outdone, the day after the election, New York Times<\/em> columnist Paul Krugman wrote, \u201cIt really does now look like President Donald J. Trump, and markets are plunging. When might we expect them to recover? \u2026 A first-pass answer is never. \u2026 So we are very probably looking at a global recession, with no end in sight.\u201d<\/p>\n

You\u2019ve gotta love that \u2013 a Nobel Prize-winning economist who foresaw a downturn with no end in sight and markets that would \u201cnever\u201d recover. (Krugman may be the nation\u2019s most obvious and unsympathetic propagandist.)<\/p>\n

I\u2019m not faulting these men for getting the economy and financial markets completely wrong. (Although, let\u2019s face it\u2026 they did.) I\u2019m faulting them for letting their political views override their good sense.<\/p>\n

Speaking of which, President Trump might be careful about hogging the credit for the rally he experienced during his tenure. For one thing, stocks can get thrown into reverse in an eye blink.<\/p>\n

For another, while it\u2019s true that Trump\u2019s tax cuts and deregulatory policies were good for hiring, wages and capital spending, presidents have limited influence over the business cycle.<\/p>\n

Far more potent are inflation, interest rates, Fed policy, energy prices, currency fluctuations, worker productivity, consumer confidence, and corporate earnings.<\/p>\n

No matter. Voters will credit or blame the sitting president for the economy\u2019s performance.<\/p>\n

(Recall George H.W. Bush\u2019s rapid fall from a 90% approval rating following the Gulf War to an ignominious loss to the upstart from Arkansas, thanks to a tepid economy.)<\/p>\n

Look back through history, and you\u2019ll see stocks have delivered exceptional returns under both Republican and Democratic administrations.<\/p>\n

The S&P 500 returned 12.4% annually under Carter, 15.1% under Reagan, 15.5% under Eisenhower, 15.6% under Ford, 16.3% under Obama and 17.5% under Clinton.<\/p>\n

Only time will reveal the future president\u2019s legacy. Meanwhile, don\u2019t let your political views \u2013 whatever they may be \u2013 turn you away from the market.<\/p>\n

Commerce trumps politics.<\/a><\/p>\n

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