Politics and investing

in Business/Raymond James by

We like politics, and we love investing. But we run from anything conflating the two.

Earlier this week Bloomberg reported that Americans recently broke the American Psychological Association’s anxiety meter for a record level of stress. You read that right. No, this is not from late 2008. This is from January 2017:

“The results of the January 2017 poll show a statistically significant increase in stress for the first time since the survey was first conducted in 2007,” the APA said in a report on the survey of 1,019 adults living in the U.S., conducted from Jan. 5 to Jan. 19 by Harris Poll.

Americans’ stress levels in January were worse than in August, in the middle of the angriest, most personal campaign in recent memory, when some believed the anxiety would abate after the election. At 57 percent, more than half of respondents said the current political climate was a very or somewhat significant source of stress. Stressors for everyone, including Republicans, were the fast pace of unfolding events and especially the uncertainty of the current political climate, said Vaile Wright, director of research and special projects at the APA.

What is it that has everyone so worked up? Politics.  

How many people do you know that invest their politics?  

When the resident of the Oval Office is of their same political party, do they tend to be more bullish, and when the opposite is true, do they tend to be more bearish?

When we read that article we couldn’t help but think back to something that The Motley Fool wrote last year as it relates to the problem of conflating politics and investing:

“Economics is a close cousin of politics, which is dangerous because politics is a close cousin of emotional decisions detached from reality.

“Not only do most of us have emotional opinions about who should/shouldn’t run the country, but we unfailingly overestimate how much influence presidents have over the economy and stock market. When presidents do impact the economy, good luck guessing how markets will respond. Lots of smart people predicted that Barack Obama’s spending plans meant surging interest rates and a collapsing dollar.

“Growing the economy means getting everyone to win, whereas politics by definition means getting the opposing party to lose. Rationality melts when you set up this kind of my-team-versus-yours dilemma. Psychologist Geoffrey Cohen showed that Democratic voters supported Republican proposals when they were attributed to fellow Democrats more than they supported Democratic proposals attributed to Republicans, and vice versa. Imagine the same part of your brain analyzing investments. It’s a disaster.

“We like politics, and we love investing. But we run from anything conflating the two.”

Thus, the power of an emotionless method of investing.  

So despite all of the stress, things continue to look pretty good to us.

This article was written by Dorsey Wright and Associates Inc., and provided by Arthur Levin, managing director, TLS Wealth Management of Raymond James.

Arthur Levin is a financial advisor with Raymond James & Associates, Inc., Member New York Stock Exchange/SIPC located at 2015 Boundary St., Suite 220, Beaufort SC 29902. 

He can be contacted at 843-379-6100 or arthur.levin@raymondjames.com or visit our website at: www.tlswealthmanagement.com.

The information contained herein has been prepared without regard to any particular investor’s investment objectives, financial situation, and needs. Accordingly, investors should not act on any recommendation (express or implied) or information in this material without obtaining specific advice from their financial advisors.