The unfortunate and largely unpalatable reality of trading and investing in financial markets today is that one must have one’s intellect tuned to the political frequencies of the day. And by “the day,” I literally mean by each day. Never has this reality been more clearly demonstrated than over the past 24 hours, as Wednesday’s exuberant buying comes after the political development of a two-week ceasefire in the war between the United States and Iran. As of midday Wednesday, the major domestic equity indices were all higher by some 3%, while oil prices had plunged more than 16%.
In his column on April 8 in the Wall Street Journal, Spencer Jakab points out that the biggest driving force in terms of material market moves, at least in the short term, came in reaction to distinctly political developments such as tariff policy and the Iran war.
“Over the 300-plus trading sessions since Trump took the oath of office last year, nine of the S&P 500’s 10 biggest gains have had to do with relief over tariffs or Iran. Owning stocks on just those days would have earned an investor 52% on their money compared with 12% for buying and holding an index fund throughout. Wednesday’s cease-fire rally might crack the top six,” writes Jakab.
Perhaps this reality shouldn’t surprise anyone, as unfortunately, over the past century, politics and economics have become interwoven on such a cellular level that the two resemble a strand of genetically modified DNA. This reality is just that, a reality, and ignoring it when putting our money to work comes at our own peril.
Now, does this mean we should trade and invest solely with our sails tacked to the political winds? No. Much more important factors should determine our investment strategies, and particularly our long-term investment strategies. Factors such as a company’s revenue and earnings growth, profit margins, the relative price strength of the stock, fundamental metrics such as P/E and PEG ratios, the technical patterns in a stock’s chart, institutional buying, accumulation and distribution and many other factors are far more relevant when determining which stocks, sectors and funds to own.
That said, when markets can plunge or soar based on the next whimsical Truth Social post from President Trump, well, the reality is we must pay attention. This is why we have to know politics as investors, even if the better angels of our nature repel us from such topics.
On this front, I wanted to address a reader comment that I recently received from a subscriber to my Forecasts & Strategies newsletter. Subscribers to this publication can read my full response to the reader’s comments in the new April issue, but I’ll just recap the gist of it here, as it’s relevant to the reason why we have to know politics when putting our money to work.
In response to a section in the March issue of Forecasts & Strategies that argued against President Trump’s economically stultifying tariff policies and in favor of his pro-growth tax and deregulation policies, this reader told me that my “full-page political comment does not belong in your financial publication.” Well, as I’ve just explained, knowing and explaining politics as it relates to our money is critical if we want to achieve outstanding investment results.
Here’s the essence of my response that digs deeper into this situation:
“…political comments as they relate to our economy and our money very much belong in this publication. In fact, this publication is all about assessing the current political, geopolitical and economic conditions that affect our money. Commentary on tax policies is especially relevant to our money, so if there is a policy that moves markets and/or one that is not good for our economy, i.e. tariffs, then I will continue to point this out so that everyone knows how to assess these threats…”
Digging even deeper into this issue, as that is what The Deep Woods is all about, I went even further here to explain to my readers that any political/economic commentary I make is filtered through the philosophical lens that advocates for laissez-faire capitalism of the sort where the government and the economy are completely separate.
That includes tariffs, subsidies and nearly all government programs, aside from what I think is the essential function of government, which is to protect individual rights. This means defense, courts, law enforcement and perhaps a few other functions, are really the only truly legitimate functions of government. The rest of society’s needs should be provided (and can be provided far better) by the private sector.
Of course, I know that what we have today in America is not a laissez-faire free market. Yet, when assessing policies that veer far from this ideal, i.e. tariffs, I will not hesitate to point this out. Moreover, when policies get closer to this ideal, i.e. tax cuts and deregulation, I won’t hesitate to point that out as well.
Finally, and perhaps this is all-too obvious, sharing my views on the markets, the economy, politics and how best we can profit from the prevailing winds in each of these areas is the raison d’être of the Forecasts & Strategies newsletter advisory service. Sharing these thoughts is also a big component of all of my writing on this subject. Hence, I will continue delivering such opinions on these important issues in the service of a key primary objective, and that is to celebrate the virtue of achieving greater and greater financial freedom.
Speaking of freedom, in just three months, the biggest and brightest luminaries in the liberty movement will gather around the Las Vegas Strip for FreedomFest! For four days in July, you get to meet and mingle with some of the brightest minds in the liberty movement, and you get to bask in the gloriously liberating spirit of the open exchange of ideas. This kind of atmosphere just isn’t found anywhere else, and the best part is, you get to be there!
So, join me and my Eagle Financial Publications colleagues at FreedomFest: “Think Independent” July 8-11 at Caesars Forum Las Vegas! Claim $100 off the current Regular Attendee or VIP Full Pass rate when you register with discount code EAGLE100. Or call Hayley to register over the phone at (855) 850-3733 ext. 202.
Jim Woods’ Winners Circle members get half-price tickets! Email register@freedomfest.com for your special registration link.
I look forward to celebrating liberty with you!
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It’s You
“If you think someone has ruined your life, you’re right. It’s you.”
— Friedrich Nietzsche
What is the source of our sorrow? What is the source of our elation? I think there is but one answer, and though it may seem intuitive, it’s something that takes years to fully comprehend. You see, the source of all of your emotions is really just your thoughts, and how you handle your thoughts will largely determine your life.
If you want to cultivate the values that matter to you, then cultivate the thoughts that correspond to those values. Conversely, eschew the thoughts that are antithetical to your objectives. No, it’s not easily done. A deluge of negative thoughts can rain down on us at virtually any time.
Yet a sharpened mind knows how to grab the umbrella, switch the narrative and focus on the thoughts that provide a ray of positive sunshine. So, don’t let your thoughts, and yourself, ruin your life. If you do, then the only one to blame for ruining your life is you.
Wisdom about money, investing and life can be found anywhere. If you have a good quote that you’d like me to share with your fellow readers, send it to me, along with any comments, questions and suggestions you have about my newsletters, seminars or anything else. Click here to ask Jim.
In the name of the best within us,
Jim Woods
