Pearls of Wisdom: Investment Implications of the Election


Pearls of Wisdom: Investment Implications of the Election

As with any shift in leadership, there are bound to be changes in every sector. After a long tenure in finance, I see the following to be the investment implications of the election:

  1. I have said before that presidents of both parties get more credit and more blame than they deserve for the economy. I don’t believe that the president generally affects the broad economy all that much.
  2. There are things that the president could do that would make a big difference. A large military action using many people could have a major effect - just look at the economic implications of the war in Iraq as an example. Lessening of international trade could lower economic activity here in the United States, and also lower investment. Consumer goods companies are down, although restaurant chains are up. Probably because people are assuming that the federal minimum wage will not rise.  A higher minimum wage will help most consumer companies like grocery stores because people who are more likely to spend will have more money in their pockets.  Racist and sexist things that people say are horrible and disgusting, but they don’t really affect investments.  
  3. There are pundits and advisors who are saying that Congress is more likely to fund infrastructure projects not funded under the Obama administration. Stock in companies that would be involved in building roads have been doing well - on the theory that the country might finally invest money in fixing roads and bridges, etc.
  4. As general rule of thumb, it is always best to run the country in a competent manner. If key regulators (SEC Commissioners, Fed Governors, US Attorneys) are put in place who are a bunch of sycophants, that could inject a great deal of uncertainty, which could lower the valuations of companies.
  5. There are companies which have exposure (for better or worse) to policy decisions. I am observing the market, but I can never really know for sure if there is a true causation link between happenings. However, my observations are as follows:
    • Gilead (which makes very expensive treatments for hepatitis) and Wells Fargo are both up. A likely reason is that the people have elected representatives who don’t care (very much) about high drug prices and fraud committed by banks.  
    • Apple is down, probably because Trump had been complaining about iPhones being made in China, and maybe he will take some kind of action about that.  
    • Berkshire Hathaway is up, possibly because of their railroad business which will do especially well if Congress decides the country doesn’t care about air pollution caused by coal.

Overall it is hard to say what exactly will come of the change in leadership. A myriad of factors affect the economy, most of which are not in the control of the president. I see where other investors have a higher level of fear. Personally, I am always cautious because I know that any day, something could go wrong, but I am not making any changes in my investment plans based on the election.

 

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