Controversy. Special investigations. Twitter bombs. Modern politics is making investors feel unsettled and concerned; but how much do politics really matter to your portfolio? Paul Fain, president of Asset Planning Corporation, recently appeared on WBIR to share his perspective.
AROUND THE WATER COOLER OR THE COFFEE POT, THERE IS A LOT OF BUZZ ABOUT POLITICS ISN’T THERE?
Domestic and foreign policy comes up frequently in conversations:
- Tax reform: will there be tax reform. Will we get tax cuts?
- Healthcare reform: will the ACA be repealed? Will it be replaced? Will I have health insurance?
- The White House: will President Trump be impeached? How would that affect the stock market and my investments?
- International: How will Brexit impact my portfolio?
HOW DO YOU ADDRESS THESE CONCERNS?
There is good, bad, and ugly in policy decisions:
- Tax cuts can stimulate spending and saving.
- Rising healthcare costs will continue to be a personal budget issue.
- Impeaching a president has led to short-term market declines followed by recoveries: Nixon and Clinton
- Foreign investing: Brexit impacts Britain. A bit less to Europe. A bit less to the rest of the world. Time line? Mostly questions?
IT SEEMS THAT THE SENTIMENT PENDULUM HAS DRAMATICALLY SWUNG IN AN OPPOSITE DIRECTION…
- At the beginning of the year, people may have been too optimistic about reform. Now they may be too pessimistic.
- How much does all this really matter? Much less so than we think. It makes for interesting conversations but Earnings “trump” politics.
- The stock market has gone up because of corporate earnings, companies are doing well.
- Holding back on investings when there are geopolitical risks in the hope of buying when the risks seem to have passed may not yield good results.
- Diversification is probably the single most useful step an investor can take in reducing the risk. Build and maintain an “all-seasons” investment portfolio.
This segment originally aired on WBIR on 7/30/17.
