Investing and Politics: A Wobbly Combination
A few days ago a client called to talk about investing some new money. The bulk of his substantial nest egg has been in money market funds for more than two years, and as a result he has missed out on hundreds of thousands of dollars in gains. Why has he stayed on the sidelines? It’s because he disagrees with the policies of the current U.S. president.
He’s not alone; many investors have told me something similar, and yes, I heard the same basic story during the years of the previous administration.
Both approaches make little sense. The stock and bond markets are moved by an untold number of forces pushing and pulling. The president of the United States has power, but far less than many citizens think. Almost everything he wants to do is filtered through Congress, and when it comes to the world-wide stock and bonds markets, his decisions and those of the Congress are just cogs in a very large wheel.
What moves the Fidelity mutual funds we invest in for you? U.S. politics for sure, and also the weather, housing markets, global energy supplies, technology breakthroughs, events in Europe and China, turmoil in the Middle East, and on and on. To jump in or stay out of the stock market based on what one American politician espouses is nonsensical.
When it comes to your mutual fund investing, look beyond the noise of politics. This is America, and no matter who is in the White House our domestic corporations will continue to change with the times, develop new products, and lead the world.
Or to put it another way, vote based on the donkey or the elephant, but invest thinking only about the bull or the bear.