Most people know not to mix business with pleasure.
Fewer people think of investing and pleasure—or, as it were, investments and politics.
Apparently, there's a whole new round of Trump-friendly ETFs and similar products (stocks that will allegedly benefit from a Trump admin: Zweig mentions private prisons, some tech, defense+aerospace-- probs also oil services). How exactly are they to make sense? Newsflash: they don't: "mixing politics with your portfolio—regardless of your party affiliation—is an old, persistent and pernicious idea."
any idea obvious enough to occur to you and me is already in the market price. Defense and aerospace stocks are bound to boom in this administration? That was priced in months ago. Coinbase will prosper under President Trump’s favorable policies toward cryptocurrencies? That, too, has long been priced in.
If anything, sectors and individual stocks that most of us thought would do well under a Trump admin had their excess returns in the months and weeks around the election—our beloved BTC being a case in point (ridiculous and dead as it is! #900000).
What's even worse is that most assets aren't affected specifically or directly by political actions:
Inflation, interest rates, commodity prices, the value of the dollar, wars, natural disasters and changes in other nations’ policies are among the countless factors that can knock stock prices up or down. U.S. presidents have some control over some of those forces, but total control over none. And once your political scruples rule out any kind of stock, you own only a segment of the market—which is likely to behave quite differently from the market as a whole, for better or (more likely) for worse.
Case in point: The disgraced ESG
Consider ESG investing, which seeks to make businesses and the world [E]nvironmentally cleaner, [S]ocially fairer and [G]overned better—generally from the viewpoint of people who are left of center. Until recently, ESG was an extraordinarily popular strategy, amassing trillions of dollars in assets. Yet many people who pumped money into these funds helped neither their own returns nor the causes they sought to advance.
Problem there is that you're not actually changing the world for the better by shifting who owns the stocks of "bad" companies. (If anything, you ensure those "bad" companies are owned by people who couldn't give less of a shit about your lofty ideals.)
As my colleague James Mackintosh pointed out near the peak of the ESG craze, while shunning “bad” companies and investing in “good” ones might give you a warm fuzzy feeling, it isn’t likely to make the world a better place. You’re not starving “bad” companies of capital or showering “good” ones with surplus money; they’ve already sold shares to the public, so what you do with your dollars seldom has any direct impact.
Now, just as the ESGs failed to live up to their proponents' hopes, Trump-y ETFs will similarly fall short.
the stock market doesn’t know or care how you vote. As I’ve written, staying disciplined in your investing approach is one of the keys to long-term success. Letting your political views penetrate your portfolio is a good way to express pride or anger. It’s unlikely to boost your returns and can wreak havoc on your investing discipline.
Here's a crazy idea: maybe assets and political ideas don't mix so well, eh?
non-paywalled here:
https://archive.md/vkPrR