Investors are hypersensitive to politics

Wall Street often ignores political headlines. Earnings and the economy are what matter most to the market. ...

Posted: Dec 14, 2018 4:08 PM
Updated: Dec 14, 2018 4:08 PM

Wall Street often ignores political headlines. Earnings and the economy are what matter most to the market. But it's getting harder for investors to brush aside what's going on in Washington. In fact, it appears investors are now hypersensitive to news from DC.

The political landscape influences the investing decisions of three-quarters of investors surveyed recently by advisory firm Raymond James.

Banking, finance and investments

Business, economy and trade

Donald Trump

Financial markets and investing

Government and public administration

Political Figures - US

Politics

Raymond James surveyed 1,000 US investors with at least $75,000 in the markets in August. Forty percent said that politics were either "extremely or very important."

What's more, 70% said that news headlines in general influence their investment decisions.

It also seems that a decent number of investors are following the lead of President Donald Trump, who told the Washington Post late last month that "I have a gut and my gut tells me more sometimes than anybody else's brain can ever tell me." According to Raymond James, 35% of the investors surveyed said that their emotions are "extremely or very influential" to their overall strategy.

So what happened to the notion that investors only care about hard data and beating expectations?

It seems we're now in a strange time where politicians, particularly Trump, are behaving in ways that are, to put it mildly, not exactly conventional. Trump has bashed Federal Reserve chair Jerome Powell, who Trump himself appointed to lead the Fed, repeatedly for raising interest rates.

And Trump has attacked multiple corporate leaders -— most recently GM (GM) CEO Mary Barra after the auto giant announced plant closures and layoffs.

Then there was the unusual spectacle just this past Tuesday — the public sparring between Trump and Democratic leaders Chuck Schumer and Nancy Pelosi about a border wall with Mexico and a possible government shutdown.

Politics 'playing with people's emotions'

Add all that up and you have a market that doesn't know what to think anymore about Washington.

"The political climate, no matter what side of the fence you are on, is playing with people's emotions," said Frank McAleer, senior vice president of wealth, retirement and portfolio solutions at Raymond James.

"But I'm a bit surprised that politics is playing this much of a role in the market," McAleer said.

Others agree that the political confusion is hurting stocks. Investors appear to be glossing over solid earnings and good economic reports. The jobs market is healthy. Consumers are spending.

"Policy risk is becoming more of the issue. It is overshadowing the good macro story," said Simona Mocuta, a senior economist with State Street Global Advisors. "There has been a shift in perception. People are ignoring good fundamentals because the political noise is bad."

The trade spat with China, another political issue, isn't helping either.

"There are several factors that investors are focused on, none of which have anything to do with fundamentals — such as the importance of the tariff discussions," said Wayne Wicker, chief investment officer with DC-based investment firm Vantagepoint Investment Advisers.

"Cynics would suggest that negotiations with China are unconventional and unrealistic. Politics are having an outsized impact on the markets."

Compromise on infrastructure?

That may continue for the foreseeable future. But State Street's Mocuta said that there is one glimmer of hope. She argued that it is still possible that Trump and Democrats in the House and Senate could wind up agreeing on an infrastructure bill.

If that happens, it could be good for the economy — and a rare bit of encouraging news from Washington that Wall Street would even approve.

"The saving grace with infrastructure is that it would not be just to boost growth. It would actually rehabilitate and improve existing infrastructure," Mocuta said.

"In that sense, you can't ignore the possibility that the two sides can compromise," she added. "It may not be a huge bill, but the argument is that infrastructure improvement could aid productivity and boost growth."

Minnesota Coronavirus Cases

Data is updated nightly.

Confirmed Cases: 145465

Reported Deaths: 2491
CountyConfirmedDeaths
Hennepin36126997
Ramsey14966377
Dakota10420139
Anoka9573156
Washington649074
Stearns647850
Scott366636
Olmsted344930
St. Louis333074
Wright282516
Clay259145
Nobles236818
Blue Earth21367
Carver19167
Sherburne189924
Kandiyohi18695
Rice174210
Mower155318
Winona136219
Crow Wing120822
Chisago11912
Benton109012
Lyon10446
Beltrami9839
Otter Tail9808
Waseca95010
Todd9337
Polk8845
Morrison8529
Steele8173
Itasca80617
Douglas8044
Nicollet78318
Freeborn7275
Goodhue68211
Le Sueur6716
Becker6654
Martin63718
McLeod6294
Isanti6196
Pine5960
Watonwan5854
Carlton5372
Chippewa4893
Mille Lacs47118
Hubbard4695
Cass4385
Wabasha4281
Dodge4200
Pipestone37217
Meeker3703
Rock3665
Brown3653
Roseau3650
Redwood31012
Yellow Medicine3096
Murray3023
Cottonwood2990
Renville28613
Fillmore2840
Wadena2743
Sibley2733
Faribault2580
Houston2492
Kanabec23610
Swift2322
Jackson2261
Pennington2221
Aitkin2142
Unassigned20354
Stevens2001
Lincoln1970
Koochiching1775
Pope1740
Big Stone1671
Marshall1611
Wilkin1484
Lac qui Parle1473
Clearwater1431
Norman1410
Lake1390
Mahnomen1342
Grant1094
Red Lake842
Traverse610
Kittson540
Lake of the Woods471
Cook200

Iowa Coronavirus Cases

Data is updated nightly.

Confirmed Cases: 124963

Reported Deaths: 1700
CountyConfirmedDeaths
Polk20019290
Woodbury753099
Linn6256134
Black Hawk6154102
Johnson610731
Dubuque563959
Scott501843
Story416418
Dallas364047
Pottawattamie343145
Sioux259517
Buena Vista231812
Marshall217136
Webster200915
Plymouth176731
Wapello161062
Clinton159028
Muscatine156058
Cerro Gordo154527
Des Moines153911
Crawford140015
Warren13477
Jasper124034
Carroll123113
Henry11495
Marion109211
Lee103412
Tama102138
Delaware84314
Dickinson8159
Wright7781
Boone7659
Mahaska75125
Bremer7459
Jackson7193
Harrison71217
Washington71212
Benton6782
Lyon5868
Clay5684
Louisa54915
Jones5374
Winnebago52719
Clayton5263
Winneshiek5259
Cedar5217
Hardin5187
Buchanan5155
Kossuth5020
Hamilton4945
Poweshiek49411
Floyd47211
Emmet46221
Cass4563
Iowa45610
Mills4403
Cherokee4342
Page4270
Fayette4224
Guthrie42115
Allamakee4189
Sac4174
Butler4163
Shelby4112
Franklin40118
Humboldt3833
Chickasaw3821
Hancock3796
Madison3783
Clarke3633
Grundy3526
Calhoun3374
Palo Alto3352
Osceola3100
Mitchell3021
Howard2889
Monroe27512
Union2725
Jefferson2671
Taylor2632
Appanoose2583
Monona2562
Pocahontas2532
Ida2312
Fremont2172
Lucas2146
Adair2041
Greene1990
Montgomery1977
Davis1954
Van Buren1942
Keokuk1901
Audubon1831
Decatur1700
Wayne1553
Worth1550
Ringgold1042
Adams841
Unassigned90
Rochester
Clear
35° wxIcon
Hi: 56° Lo: 25°
Feels Like: 23°
Mason City
Clear
34° wxIcon
Hi: 61° Lo: 27°
Feels Like: 23°
Albert Lea
Clear
36° wxIcon
Hi: 59° Lo: 26°
Feels Like: 26°
Austin
Clear
36° wxIcon
Hi: 59° Lo: 26°
Feels Like: 28°
Charles City
Clear
36° wxIcon
Hi: 61° Lo: 27°
Feels Like: 26°
Tracking a breezy weekend
KIMT Radar
KIMT Eye in the sky

Community Events