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There is nothing original about pointing out that there is a wedge separating our society, creating a wide gulf between people with very strong ideological opinions and political beliefs. So, I am not going to begin by saying something so cliché such as, “We have never been more polarized” to begin this article. For one, that phrase or a similar version has been used way to often lately. Secondly, I am not so sure that “we have never been more polarized”. History does tend to repeat itself, so it seems probable that we have been through similar situations in the past. Either way, my intention is not to debate political divisiveness throughout history. I decided to write this article when I came across the graph below provided by Axios, where it attempts to make the case that your political leaning or affiliation may have a meaningful influence on or affect your attitude regarding leaving your home as we attempt to reopen our economy. According to their recent data, approximately 80% of Democrats consider it at least moderately risky to attend in-person gatherings, while only about half of Republicans agree.
Since my background is in finance, not political science, I began to wonder if there is a correlation between political belief and attitude toward investing. Whether you are a Republican, a Democrat, or an Independent, I think it would be an interesting exercise to reflect on your own investing strategy throughout our recent “polarized” history. Were you optimistic about buying stocks immediately after Sept. 11th, 2001? Did you sell all your risky assets after Lehman Brothers went bankrupt? What did you think about investing in gold when it was hitting new all-time highs in 2011? Finally, did you plan on making any adjustments to your portfolio as you witnessed the surprise election results in November of 2016?
The brief stroll through memory lane we just took encompassed our three most recent presidents’ time in office. In addition to the flip flop in party control of the White House, similar changes have occurred in Congress.
Now we do not have to decide whether the economy WILL return to “normal”, rather we must decide HOW LONG it will take for it to happen. Depending on your opinion, you may be anywhere between fully invested in stocks to being fully in cash. Talk about polarized!
Spoiler alert – I do not know when the economy will return to normal. However, there are two famous Wall Street adages that appear to be in full effect when observing the stock market moves of late:
1) Don’t fight the FED
2) Don’t fight the tape.
The FED refers to the Federal Reserve which has pumped an unprecedented amount of money into the system to keep us from what might otherwise be an economic abyss. The “tape” is a reference to the old ticker tape machines which would print out the stock quotes. Don’t fight the tape means do not bet against the movement of the market.
As always, Total View Advisors recommends having a sell discipline. Some of us are very good at picking entry points, others are very good at exiting on time. Very few can do both well.
The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Prior to making any investment decision, please consult with your financial advisor about your individual situation. Any opinions are those of the author, and not necessarily those of Raymond James.
This article was written by Gus Vega, Managing Partner, Total View Advisors and Branch Manager with RJFS. He can be reached at 786.315.4870, 9155 S. Dadeland Blvd. # 1014, Miami, FL 33156. Total View Advisors is not a registered broker dealer and is independent of Raymond James Financial Services, Inc. Securities offered through Raymond James Financial Services, Inc., member FINRA / SIPC. Investment advisory services offered through Raymond James Financial Services Advisors, Inc.
