Investors: Inaugurate Objectivity

Today is the day that Donald J. Trump will be inaugurated as the 45th U.S.  president.

From weeks before the election right up until today, talking heads have been telling us how momentous this will be for the stock market. First, the pundits warned us of an imminent market slump. Then when the markets defied their expectations and rallied after his surprise victory, they crafted an explanatory narrative of deregulation, infrastructure stimulus and tax cuts. Now, with markets going nowhere, the sages are blaming high U.S. stock valuation.

History strongly suggests these folks should pour themselves a tall glass of STFU and be roundly ignored by you, the investor class. There are many reasons why this is so, but let’s begin with a few choice examples from just before and shortly after our departing president, Barack Obama, was elected.

On March 6, 2009, the Wall Street Journal published an op-ed with the unfortunate headline “Obama’s Radicalism Is Killing the Dow” by the Republican economic operative, Michael Boskin. I say “unfortunate” because that was just three days before the market’s low point. The Standard & Poor’s 500 Index has since gained 293 percent, while the Dow is up almost as much.

Radical Obama Was Going to Crash Markets
Standard & Poor’s 500 Index gains since March, 6, 2009
screen-shot-2017-01-20-at-12-27-53-pm
Source: Bloomberg

 

Consider another poorly timed article. This one appeared in the Washington Post on Sept. 14, 2008, with the headline, “Quit Doling Out That Bad-Economy Line.” This article, by Donald Luskin, explained that the economy was great and all the worrying was like “a virus.”  This was, need I remind you, the very day before Lehman Brothers Holdings Inc. failed and two days before American International Group Inc. had to be bailed out by the federal government, sending the financial crisis into high gear. Oh, and this article appeared 10 months after the recession had started, and in the midst of a 57 percent stock-market crash.

These two epic fails are really just political screeds in the guise of economic analysis, both of which turned out to be monumental money losers for anyone foolish enough to listen to them . . .

 

Continues here: Love Trump? Hate Him? That’s No Way to Invest.

 

 


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