Populism is Tough on Markets

By September 27, 2019The Friday Brief

Just a few years ago, before the populist revolution in our country, the ‘sausage-workings’ of government were largely carried out behind heavy gilded doors by professional politicians, appointees and bureaucrats. Every two, four, and six years we judged their finished products in terms how much better or worse off we were. We mostly left them alone in the interim to do their thing behind those closed doors. Then every election cycle, depending on the job they did, we either voted them another round, or we sent them packing.

But in late 2016, with the dawn of a new era of populism, Twitter and instant news, the doors of most every governmental institution were flung wide open to reveal the not-so-pretty and highly inefficient inner-workings of government. Our new front-row-seat to high level government, court, and bureaucratic-theater has revealed an ugliness and brokenness that has shaken confidence from Main Street to Wall Street.

Markets do not like uncertainty and the current new-normal of open-air discourse of government, bureaucratic, and intelligence agencies has rattled investors and business leaders alike as they hear much more than ever before of the give-and-take of negotiations that were previously done in seclusion. There is such a thing as too much information, and we are there. The rush-to-market media of near-raw news feeds only serves to heighten the emotional swings.

The latest wave of uncertainty comes with the Dems’ recent announcement of a formal inquiry aimed at impeaching the president. What it portents for markets and your portfolio is a reasonable question, without an answer. But if history is a guide, and if no constitutional crisis results, the effect will likely be muted.

Watergate had little impact on markets, while the S&P 500 rose 28% during the impeachment trial of Bill Clinton. Remember though, Clinton’s impeachment took place during the dot.com and Internet boom of the late 90’s, in which the stocks tech stocks, changing our lives, soared in value. It’s impossible to know the full impact of either impeachment given that the process did not take place in a vacuum.

Today, it is likely that impeachment proceedings in the House, and maybe the Senate, will bring to a standstill any hope of legislation on infrastructure, healthcare, gun safety, and others where there is bipartisan support. Investors are also concerned that the President will be sufficiently distracted, politically weakened and waited out by the Chinese so as to be less effective in negotiating to mute or end the trade war, potentially dampening US economic growth.

There is of course no way of knowing how long or serious this latest Washington mess will last or how much it will impact our economy, markets, and lives. But you can take comfort in knowing that your portfolio is designed to withstand the shocks just as well as it benefits from good times. As always, please call us if you have any questions or concerns. We’re here to help.

Author Sam Bass Jr.

Sam founded Beacon Wealthcare in 1998. He has thirty five years' experience investing money for his clients. In 2006 he changed the focus of his firm from asset/return to a client/goal-centered and adopted state-of-the-art planning and management systems to deliver the best fully integrated planning service available. Sam holds a BA in English Literature from Hampden-Sydney College, 1975 and an MBA from Wake Forest University, 1981. He concentrated in International Finance, and did research for an International Finance textbook which included a summer at the London School of Economics. He is married to Sharon, a talented pleinAir oil painter, They enjoy being with their three children, their spouses, and five beautiful grandchildren as often as they can. Sam loves Jesus, sailing, cycling, and writing.

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