We’ve written about the Trump trade, the “sell America” trade, and the Trump Always Chickens Out (TACO) trade—all trends that have taken hold among institutional investors and retail traders alike after President Trump was elected.
It's no wonder that a huge factor dictating how bullish or bearish an investor really is comes down to their political leanings, the Wall Street Journal reported.
For investors who are critical of President Trump, Liberation Day and the ensuing market turmoil was seen as a harbinger of things to come, and many opted to move out of US stock markets altogether. Yet many proponents of President Trump are far more bullish on the state of the economy and American businesses.
According to an April Gallup poll, 59% more Democrats than Republicans expected stocks to crash over the next six months, while 47% more Republicans than Democrats forecast a market boom—the largest partisan gap ever since Gallup began tracking the data in 2001.
Increasingly divided investors are also picking different investment funds. A partially politically motivated backlash against ESG investing has pushed the practice nearly to extinction. Meanwhile, a slew of new ETFs aimed at capitalizing on an investor’s political leanings, for instance, or mimicking specific politicians' trades, have risen to the fore.
Politics and investing don’t mix
Pretty much any analyst you ask will tell you not to base portfolio decisions on who’s in office. After all, the stock market tends to go up no matter which party is in charge, and the sectors that boom under a certain president can be counterintuitive to their party’s policies.
The S&P 500’s recovery since Liberation Day seems to prove that point. The White House has paused, reversed, and compromised on many tariffs, contributing to the market’s comeback. Investors who dumped stocks after the initial tariff announcement worried about what the president would do next have missed out on the gains.
The big picture: According to data compiled by Paul Hickey, co-founder of Bespoke Investment Group, $1,000 invested in the stock market 70 years ago would be worth about $2 million today. But if you stayed in the market only when a Democrat is president, that number would only be $72,000. Staying invested only during Republican administrations would leave you with just $28,000.
In other words, don’t let short-term political chaos thwart your long-term gains.—LB
Making sense of market moves
Stay up to date on the latest market news with daily analysis of the investing landscape, served up Brew-style.