Don’t let politics influence your investments: Strategist

Former President Trump’s guilty conviction in his New York hush money trial is making waves across the political sphere. But are these ripples strong enough to make it all the way to the equity market (^DJI,^GSPC, ^IXIC)?

Yardeni Research President of Ed Yardeni joins Catalysts to discuss whether Trump’s guilty verdict could impact markets: “I think we’ve seen over the years that the stock market handles political turmoil fairly well.”

Yardeni explains that the effect of Trump’s conviction on the market has been “muted” since it does not change the fact that both Donald Trump and Joe Biden remain the frontrunners of the 2024 election.

He adds, “I don’t think the market needs to get all bent out of shape about this development. The market has lots of experience with the political craziness out of Washington D.C. and at the end of the day, the US economy has performed remarkably well through thick and thin.” He encourages investors not to let their personal politics get in the way of their investment strategies and sees political crises as opportunities to buy low.

For more expert insight and the latest market action, click here to watch this full episode of Catalysts.

This post was written by Melanie Riehl

Video Transcript

Now turning to the market action nearly an hour into the trading day.

Looking at a mixed picture here with the S and P down 3/10 of a percent, the NASDAQ down about 7/10 of a percent.

After that PC print, we are seeing some pressure on yields as well.

The Wall Street may be fixated on the fed’s preferred inflation gauge.

A lot of the attention more broadly today is on former President Trump’s guilty verdict in that hush money trial.

So which of these two is gonna matter more for investors, economic data or what’s going on heading into the election here with more.

We have Ed Yardeni, he is President of Yardeni Research to discuss Ed.

Thank you so much for being here.

Let’s start on that Trump trial does a messy election and a necessarily breed a messy market reaction as well.

Uh Not necessarily, I think we’ve seen over the years that the stock market ha handles political uh turmoil uh fair fairly well.

Uh There, there’s always been partisanship in, in Washington.

Uh This, this takes it obviously to a new level but uh you know, the initial market reaction has been really quite, quite muted because I guess the perception is this really doesn’t change much that there still will be a presidential election and it’ll be Biden versus Trump.

Uh But uh I think uh even when we look at geopolitical crises, as we, as we’ve been experiencing really since Russia invaded Ukraine.

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Um initially, uh that that was bad for the market because oil prices went up and there’s a perception that that would cause a recession.

But in the bene benefit of hindsight, it turned out to be a great buying opportunity.

So I would say any uh sell off in the market uh related to a geopolitical crisis or a domestic political crisis may actually turn out to be a buying opportunity and the market will continue to focus on what is most important.

That’s the economy.

And the only, the only way politics, if politics affects that, then that will obviously have an impact on the stock market.

Do you think it will affect near term volatility?

I don’t think so.

I think uh it was a certainly a uh a bombshell uh uh verdict.

But um again, uh there seems to be no repercussions, any serious repercussions in the in the stock market.

So I think we can take uh the initial reaction is probably the ongoing reaction to this development.

And why is that a, a an event like this?

Should that be something that investors put a little bit more stock into?

Should it be something that the market cares about, at least, at least in the short term until we get a little bit more clarity given some of the uncertainty out there.

No, I, I don’t think so.

I don’t think the market needs to uh get all bent out of shape about this development.

Uh The market has lots of experience with uh political uh craziness out of Washington DC.

And at the end of the day, the US economy has performed remarkably well through thick and thin.

Um I, I often advise investors not to let their politics get in the way of their investment strategy.

Uh People who did not like uh Obama, for example, uh missed out on a very good bull market if that affected their investment strategy.

People who didn’t like Trump uh also missed out on a, a great bull market and even here under Biden, uh we’ve seen that the markets come back and is the new record high.

Uh Even though half the country may not like him and the other half uh might vote for him.

Ok. Well, since it sounds like you’re saying we shouldn’t really care, I’m gonna bite here and go towards the conversation about the stock market.

I know that you’ve been sort of bullish to a point.

And earlier today, it seemed like your view was really validated by the market, particularly what we saw with sales force, putting a lot of pressure on the dow now, the dow is sort of reversing markets.

We’re up on PC A.

Now we’re seeing a bit of downside movement.

What do you make of the market reaction that we’re seeing so far this morning?

And does it validate or invalidate your thesis?

Well, I, I, you know, you can’t really tell day, day by day.

Uh But, uh my sense is that the market has uh done a remarkably good job of uh remaining resilient as the economy has remained remarkably resilient.

Uh Inflation continues to moderate, in my opinion, um especially when you take out rent, uh rent, inflation is still sort of the the sticky area of inflation, but it is still moderating and I think we will be down to 2% by the end of the year.

And I don’t see any reason why the Fed needs to lower interest rates.

And I think the markets come around to that viewpoint as well and yet it’s holding up extremely well.

So I think the markets uh is telling us that the economy can handle these interest rates if so so can the uh the market?

All right, Ed, we’re gonna have to leave it there, but thank you so much.

Really appreciate your insights as always.

That was Ed Yardeni.

He is President of Yardeni Research.