What Does Trump's Approval Rating Mean for Investors?
Emotions and opinions can make people do crazy things. This year, more than in the past, I’ve seen and heard more political discussions tear people apart. Smart, calm and kind people turn into raving lunatics daily on Facebook discussions. It seems our divided opinions on political issues are pushing us further apart, into camps of extremes. Basically, everybody is disappointed with the government right now.
Behavioral Finance is a fancy, popular term that basically says emotional decisions are usually bad decisions. Recently, that hasn’t stopped some people from letting their political opinions persuade investment decisions. Emotions should not sway people to invest more aggressively, more conservatively, add money to their portfolio, or take more money out. Our goal is always to align investors with their financial goals. Long-term success will only come in spite of (not because of) the daily noise.
Because here’s the thing: People are always disappointed with the way things are going. Yet the markets usually shrug off popular opinions. The Oppenheimer chart below shows the Dow Jones price movements vs. presidential approval ratings:
Here’s what I see—people are rarely happy, and the market rarely cares. Presidential approval historically has little correlation with stock price movements.
Another fun bunch of ratings comes from the regular Fox News poll (Found at foxnews.com) on politics and economic conditions. Fox asked roughly 1,000 people about how things are going:
These polls definitely say more about the voters than the truth. Economically, for example, unemployment rates, household wealth, consumer spending and the Dow Jones Stock Index are at all time bests in 2017. You would think more people would realize it.
Here’s the punchline: If you waited for even ½ of the population to agree on anything, you might wait forever. Don’t put your life, finances or friendships on hold based on the White House turnstile. Don’t let the US economy influence your personal economy. Focus on the things you can control, and let the rest pass by.