Barron's cover story this weekend on whether Donald Trump or Hillary Clinton would be better for investors is a great example of the kind of article that can be extraordinarily expensive for investors who follow these pieces' advice. Another is an article I recently saw about which stocks to short if Democratic candidate Bernie Sanders somehow gets elected.
I understand the desire to play this game -- it's fun. It's like playing Pictionary with stocks and politics: If Bernie wins, that's bad for banks and brokers. If Donald gets the nod, going long defense stocks and cement companies will be a winning strategy. If Hillary wins, you'll want to own solar stocks and short gun manufacturers.
It's great to debate such things, but it's not all that useful to investors because neither markets nor the government work that simply.
For example, let's say that Bernie Sanders somehow does magically win. If that happens, all of his nice-sounding redistribution/retribution/taxation plans for banks and the rich will have to go before Congress, which has to pass legislation for them to become a reality.
However, Congress is full of some folks who are rich themselves and/or have wealthy backers. So trust me, the Democrats could win a majority in both houses of Congress and Bernie's policies still aren't going anywhere.
The same goes for a Hillary Clinton presidency. She won't be able to pass gun-control legislation any more than President Obama has been able to.
And speaking of Obama, while he's probably the most anti-gun president of my lifetime, the firearms industry should give him a special achievement award. Smith & Wesson (SWHC) traded for less than $5 a share when he took office, but fetches more than $25 today. It's even better over at Sturm, Ruger & Co. (RGR), where the stock has gone from around $5 on Obama's Inauguration Day to about $73 today. If you owned these two gun stocks, your annual rate of return over the past seven years would have been about 42%!
Of course, those using the "Who Sits in the White House" approach to investing probably would have shorted stocks under Democratic President Bill Clinton, gone long under business-friendly George W. Bush, then shorted again under the very liberal Obama. But anyone who did that is probably a big Sanders fan today, because they're almost certainly broke, homeless and in desperate need of some wealth redistribution.
The Bottom Line
I don't want to give the impression that political and regulatory environments don't matter to investors. They do, but these things typically come from Congress, the bureaucracy and others -- not the Oval Office.
A president can try to set the tone, but Congress, the courts and the states have a lot to say about what actually happens. Geopolitical and economic events also typically influence what occurs far more than any presidential desire or proclamation.
I'm a political junkie and have been for decades. I'll spend hours arguing about elections, policies and trends, and I watch conventions and debates the way other people watch sports. I'm concerned about where our nation is heading and have some pretty strong views of my own.
But these don't enter into my stock-market calculations. Instead, I let the numbers tell the story when it comes to stocks. The good growth-stock guys I know don't talk about who's in the White House, they simply ask if a company is growing and can continue to grow.
And momentum folks are only concerned with momentum, not the country's political mood. Whatever happens on the political front will eventually show up in valuations, growth rates and price momentum.
I'm sure we'll see all sorts of predictions and suggestions in coming months about the election and likely stock-market winners and losers, but don't let them overly influence the way you approach investing. Instead, I recommend focusing on your favorite investing approach and leaving the presidential odds-making to the British bookies!