As you all know I rarely talk about politics. It’s too polarizing, and to be honest it doesn’t really affect what we do. My strategies are quant based and don’t change depending on which administration is in power. We trade through it all, emotionless. We have to be ready for anything.
However, I have seen a lot of tweets recently from the always interesting President Trump talking about how the stock market is raging higher under his presidency. I saw yesterday he’s doing some preliminary testing on this 2020 campaign slogan:
“How is your 401k doing?”
I understand the need to promote himself and the party, and as well to project confidence in the economy so I see no fault there at all.
However the reason I’m talking about this today is, I don’t want people out there to actually alter their risk tolerance levels based on some hyperbolic comments from the White House.
The economy is no better or worse today than it was a year ago, or three years ago. It’s a bull market, and the stock market is doing bull market things. Many of you probably already know this, but there may also be some who are under the impression that things have changed, so let’s go to a chart:
S&P 500 since President Obama’s Inauguration in Jan 2009:
So sure markets have done well since this past January, but is there really a glaring difference here? This bull market has been raging for 9 years now, the 2nd longest in history. We’re going to have to wait several years before actually comparing which stock market did better, the Obama years or the Trump years.
Typically we allow for about a 6 month delay after a new President takes office before declaring that it’s now “their economy.” It takes a little bit of time for any new policy decisions to actually have any meaningful effect on the economy. Sticking to that long standing tradition in Economics, it’s really only been Trump’s economy for about 4 months. It’s way too early to be spiking the football. As for the numerous tweets about markets at all time highs:
S&P 500 for 20 years:
The S&P 500 saw it’s 1st all time high since the financial crisis nearly 5 years ago. President Obama had 961 trading days in office since that 1st all time high, with 124 fresh new all time highs achieved before he left office.
I’m not trying to take anything away from the current administration. A lot of people are excited about the prospects of tax reform, and maybe when that’s done they’ll take another crack at improving health care which would be great to see.
I know it doesn’t mean much coming from a Canadian, but the United States is the strongest economy in the world and most influential as well. In many ways the US President is all of our President. Of course we want Trump to be brilliant and succeed.
As far as the stock market specifically though…
It’s a bull market doing bull market things, nothing more. Maintain your risk tolerance levels, keep your allocations in check, and just take things as they come. Exuberance isn’t our style. They key to success is a long-term focus.
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