Politics and stock markets are very closely linked. Economic indicators are severely affected by political decisions, as are earnings. Considering we live in complicated economic times, not in the least due to the new Trump Administration, it can be difficult to predict how markets are going to move. However, experts like Stephen R Buzzi believe that it is possible to thrive economically during the Trump administration.
In the first few months following the presidential election, it was understandable that there was a lot of political uncertainty, something that is seen after every presidential election. However, it seems as if things haven’t slowed down at all, with one geo-political disaster after the other. And the result is that financial news websites are now filled with political headlines, and every political headline is a piece of financial news.
The Political Impact
President Donald Trump promised to restore spending on the US infrastructure, and he promised American jobs for American people. The direct impact of this was that the materials sector experienced significant growth – even though none of these promises have been made good on yet. Trump is struggling to really find his place in government, and this has an impact on the economy.
For instance, the IMF rapidly slashed their original growth rate, dropping it from the expected 2.3% in 2017 to 2.1%, and leaving it at 2.1% for 2018, down from 2.5%. This means growth is actually cut, and that is one of the many things that seems to hurt Trump’s ego. He did promise, after all, 4% growth, something that is looking increasingly unlikely.
A New Status Quo
According to Buzzi, it is important that investors learn to understand the difference between where growth truly is, and where it should be. This is done by looking at the GDPNow forecast instead, for instance, since they show what the current status quo is. Trump is not managing to get things done as quickly as he promised (look at the Affordable Care Act, for instance), and this means investors need to reset their projections as well.
Steve Buzzi warns that investors cannot ignore the political/financial headlines, however. These have had a significant impact and must be watched. However, this doesn’t mean established strategies and trends have gone out the window. In fact, most investor like Buzzi who have stuck to their old strategies have been very successful, experiencing consistent gains and solid wins, despite Trump’s administration.
The key difference is, however, that action now has to be swift in certain areas, and slow in others, and this seems to have been turned around. Hence, investors have to become more patient and they have to review their expectations of where the risks are. Buzzi has important strategic knowledge and can therefore understand which strategies will affect which items, and how the turbulence can be navigated through appropriately. Yes, there is a turbulent stock market, but that only means that investors need to continue to show confidence, despite political issues, or the economy could collapse.