In case you haven’t heard, there’s been some pretty big news on the political front recently. Last week, we heard about President Trump’s tax proposal. This week, we learned that the GOP-controlled House of Representatives passed their version of a healthcare bill to repeal and/or replace Obamacare.
It certainly didn’t take long for the Wall Street machine to kick in. I saw several articles over the next couple of days suggesting how you should be positioning your portfolio as a result of the new tax laws. I also saw several more articles that suggested what companies you should be buying (or selling) in anticipation of the changes coming in the healthcare industry.
These Bills May Not Even Pass
Don’t you think they’re a little premature? The President’s tax plan is just a proposal…with a lot of politics baked in. The last time I checked, the President doesn’t make the laws—Congress does. With the state of our politics as they are today, there is no way that the President’s proposal will make it through one, let alone two, houses of Congress without some major negotiated changes. It’s nearly the same story with the healthcare bill. It passed through the House of Representatives by the absolute thinnest of margins. The chances that it will survive a Senate vote in its current form are slim to none.
Trying to make moves in your portfolio to take advantage of changes resulting from pending tax and healthcare bills just seems a bit premature, especially since there is no certainty at all that these bills will be passed. Not only are the articles a bit premature, I would also say they are a bit (or maybe a lot) misguided.
Follow the Evidence, Not the Speculations
When it comes to investing, we follow an evidence-based strategy. That simply means that we don’t believe that anyone can accurately predict what is going to happen in the markets, and the evidence proves this. Even the best and brightest minds on Wall Street, armed with the latest and greatest technology to help them analyze an endless stream of data, cannot agree on the direction of the markets or individual securities. That’s why we don’t try to forecast. We can’t afford to play that game with the assets entrusted to us by our clients.
Yet that’s the game that Wall Street wants you to play. They want you to think you can take advantage of some piece of information that will give you an edge over everyone else. Why? Because every time you reposition your portfolio by buying or selling a security, Wall Street makes money…whether you do or not.
We don’t believe it will do you or your portfolio any good to try to act on new stories or the articles that inevitably follow. After all, in the world we live in today, with information traveling around the globe in milliseconds, there is no information advantage anymore—if there ever was.
A better strategy is to build a globally-diversified portfolio and ignore all the noise that is the news, as well as the articles suggesting how to react to that news.