Listen to the Markets
Every so often, markets go stark, raving mad. Think about the tech-stock bubble of the late 1990s or the real-estate market in 2005 and 2006. But most of the time, markets—which reflect the collective wisdom of all participants—are smarter than any one individual. For proof, look no further than the sorry track record of professional money managers.
That’s why I think it’s worth paying attention to how the stock, bond and currency markets react to news. Are tariffs a big concern for investors? What about the new tax bill? Has the latest economic report rattled folks?
For answers, don’t ask your neighbors and don’t listen to the TV talking heads. Instead, simply observe the reaction of investors, as reflected in the financial markets.
For instance, based on how markets have been moving, tariffs are more unnerving to investors than the big tax bill making its way through Congress. In both cases, however, the reaction has been quite muted. Are you freaking out over the latest developments in D.C.? It seems most investors aren’t. Despite all the media handwringing over the current administration’s actions, the S&P 500 is down only modestly in 2025.
That doesn’t mean I approve of the current administration’s policies—or that I disapprove. Rather, I’m sanguine because of something that’s long been known, which is that financial markets have historically done equally well no matter who’s in charge in Washington, and that political machinations are just one driver of stock and bond prices, and a relatively unimportant one at that.
I fear that, in response to these words, folks will start posting political commentary. But that only proves my point, which is that some investors can't separate their investment portfolio from their political beliefs. How many investors have sold stocks this year because they hate the current administration's policies, only to miss out on the market's partial rebound? My advice: Stop investing based on your political views—and listen to the market.
That’s why I think it’s worth paying attention to how the stock, bond and currency markets react to news. Are tariffs a big concern for investors? What about the new tax bill? Has the latest economic report rattled folks?
For answers, don’t ask your neighbors and don’t listen to the TV talking heads. Instead, simply observe the reaction of investors, as reflected in the financial markets.
For instance, based on how markets have been moving, tariffs are more unnerving to investors than the big tax bill making its way through Congress. In both cases, however, the reaction has been quite muted. Are you freaking out over the latest developments in D.C.? It seems most investors aren’t. Despite all the media handwringing over the current administration’s actions, the S&P 500 is down only modestly in 2025.
That doesn’t mean I approve of the current administration’s policies—or that I disapprove. Rather, I’m sanguine because of something that’s long been known, which is that financial markets have historically done equally well no matter who’s in charge in Washington, and that political machinations are just one driver of stock and bond prices, and a relatively unimportant one at that.
I fear that, in response to these words, folks will start posting political commentary. But that only proves my point, which is that some investors can't separate their investment portfolio from their political beliefs. How many investors have sold stocks this year because they hate the current administration's policies, only to miss out on the market's partial rebound? My advice: Stop investing based on your political views—and listen to the market.
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