So, a showdown between Trump and Biden is set for Tuesday evening when the two political heavyweights face off in the first of three televised debate. It seems that investors are anxiously waiting to see who might come out on top in the first encounter.
Oh really?
Do investors care who wins? Traders might. Political commentators might. But serious investors probably don’t give a flying fig.
Nevertheless, some stock market pundits reckon that if Trump should gain the upper hand in the debates, then it could give him an advantage in the November election. If he should win, then those corporate tax cuts that were put in place in 2017 would be safe. They also reckon that Trump would continue to pick a fight with China….
…. Oh, and before I forget, more infrastructure spending could be in the offing. And on that point, how is that “wall with Mexico” coming along?
If Biden should get the better of Trump, then it could mean that taxes might go up after November. There could be more spending on America’s crumbling infrastructure, and China would probably remain in the crosshairs of the US.
However, whilst politics might be a welcome distraction for the current administration, we can’t ignore the fact that the US economy is in deep trouble. And the mess is unlikely to be resolved until its highly dysfunctional healthcare strategy is straightened out.
But just because the economy is crumbling under the weight of a lack of strong leadership, it doesn’t mean that all corporate America is suffering too. There has never been a better time than now to witness with our own eyes that there is a world of difference between a good company and an economy.
Businesses are generally guided by a need to put their capital to work in the best way possible to generate an acceptable return. It doesn’t really matter which political leader is in charge. They will work with, work through, or even work around the leader.
Meanwhile, our job as investors is to filter out the noise and stay invested. Keep looking for good companies and capitalise on volatility in the market. Remember, volatility is only a risk if you don’t know what you are buying.
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Disclosure: David Kuo does shares in all the companies mentioned.
