To The Moon

Investors move markets based on what they expect to happen in the future.

If an investor has read a lot about (a) the incoming Trump administration, (b) the state of artificial intelligence (AI) or (c) how tariffs have affected the economy in the past, he might feel like he could predict what will happen in the next 4 years.

According to Carson Group, Chief market strategist, Ryan Detrick:

• If an investor plans on calibrating his / her portfolio according to assumptions, the investor could be falling into a classic investor trap.

• Reality is, it is both challenging & difficult to draw a straight line from an incoming government’s policy proposals to certain types of companies that will benefit.

Recall when President Biden took office, everyone thought he was going be great for green energy and terrible for dirty, old crude (oil).

Guessed what, energy turned out to be one of the best performing sectors under President Biden administration. (see below)

Top 5 sectors that performed well are:

• $Technology Select Sector SPDR Fund(XLK)$.

• $Consumer Discretionary Select Sector SPDR Fund(XLY)$.

• $Communication Services Select Sector SPDR Fund(XLC)$.

• $Energy Select Sector SPDR Fund(XLE)$.

• $Financial Select Sector SPDR Fund(XLF)$.

Ironically, during President Donald Trump’s first term, energy stocks were stagnant.

Thus, defying the logic that a “drill, baby, drill” president would be a boon for the oil industry, this second time round.

Difficult to pick Future Winners.

Ryan Detrick also said:

• Trying to pick winners is tricky for a lot of investors, who think it is easy.

• There is never an easy answer. It’s usually harder to find.

• Investors hoping to glean information about US market, based on policymakers’ plans, will be likened to looking in the wrong section of the newspaper.

• Totally not worth getting mixed up in policy.

Instead, Detrick suggests:

• Follow the economy.

• Follow what the Fed is up to.

• Follow trends in inflation & interest rates.

The above are “things” - that should matter a lot to investors.

Stocks in the long run :

• Do not usually move based on what the President or Congress does.

• Move based on (a) fundamentals (eg. corporate earnings, debt levels, etc..)

  and (b) in response to what is happening in the broader economy.

Very Important:

• Investing is a long-term game.

• Investors should be looking to build compounding returns over the course of decades.

• While quick wins are possible, sticking to a diverse mix of investments usually leads to better results in the long run.

Even most professional investors do not get it right, always.

• Consider active mutual fund and ETFs managers who go into the office every day to create a portfolio that will outperform their benchmark index.

• According to Morningstar, over the decade ended in June 2024, only 29% of such funds survived and beat their average peer that just followed an index.

To sum up, for long-term portfolio - it is not a good idea to build it base it on govt policy assumptions.

With any “new” incoming administration, while there might be short-term worries or excitement about new policies, it's very hard to accurately co-relate them and guess how they would affect an investor’s investments over the long run.

My viewpoints: (mine only)

The reason why I am sharing this post is because it resonated loud and clear to me when I came across it today.

I confessed - I almost became the victim of the mentioned “classic investor trap”, as a result of being too presumptuous.

The post is most definitely a ‘wake up call’ and in the nick of time, for we are only 8 days into 2025 trading.

Little to no damage has been inflicted, thankfully.

So, do not torture oneself and waste time trying to second guess, it is not worth it. Stick to the fundamentals. Agree ?

Must Read: Click on below titles to access. Repost to share, Like as encouragement ok. Thanks.

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• Do you think anticipating how government policies will affect stocks & stock market is a strategy ?

• Do you think you have almost become a victim of classic investor’s trap, like me ?

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