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Readers Worry About Political Risk Affecting U.S. Markets, But Not Acting On It

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No matter your political affiliation, the goings-on in Washington, D.C., has had an impact on investors over the last several months. Post-election, U.S. stocks rose strongly in the hopes of increased infrastructure spending, lower taxes and reduced regulations. Eventually, though, the market looked for policy implementation and was disappointed by the initially failed repeal of the Affordable Act and its implications on the rest of the Trump agenda. Then there was the firing of the FBI director and revelations that the President may have tried to influence then-director Comey’s investigation into Russia’s involvement in the November election. We can probably expect some market turbulence as former director Comey is planned to testify to Congress later this week.

Then there are geopolitical events that could also impact markets. The growing belligerence of North Korea, China’s growing military aspirations in the South China Sea, Brexit, global terrorism, and much more could have significant implications for global equities.

AAII Weekly Survey Question

In the wake of the possible slowing political momentum that powered the market following the November election, and growing international unease, we asked our readers this question:

Political risk is the risk an investment’s returns could suffer because of political changes or instability. Instability affecting investment returns could stem from a change in government, legislative bodies, other foreign policy makers or military control. How worried are you about political risk affecting U.S. markets over the next several months?

Here are the results:

In all, 2,081 readers responded to our weekly survey.

I was a bit surprised to see that three-quarters of respondents (76% in all) are worried to some extent about political risk affecting U.S. markets in the coming months.One-third (33%) are either worried or very worried while 43% are somewhat worried.

Only 18% of readers are not worried at all about the impact of political risk on U.S. markets over the next several months.

Four percent of readers don’t think about political risk and 2% aren’t sure about the impact of political risk on U.S. markets.

Weekly Special Question

Given such a high percentage of readers who are worried, to some extent, about political risk affecting impact U.S. markets, I was very interested to see how they responded to our special question:

Considering political developments in the U.S. over the last several weeks, have you made any significant changes to your investment portfolio? If so, what changes have you made?

In all, 213 readers responded to this question.

Even though most of our readers are worried about political risk affecting U.S. markets, nearly half said that they have not made any significant changes to their portfolio in the last several weeks.

We then saw nearly an equal number of respondents say that they have either increased their cash allocation, bought stocks or sold stocks.

Here is a sampling of the responses:

  • “Added stop losses and moved cash earmarked for equity investments into bond funds.”
  • “Bought more, longer term positions in oil, oil servicing, gold and silver. Bought physical gold and silver too as an inflation hedge.”
  • “Haven’t made on changes because most of what I hear and read I think is mostly ‘noise.'”
  • “No, not yet. But I already increased [my] cash [percentage] during first Trump bump in anticipation of a negative political development in coming months. Maybe a drastic hit won’t happen but I feel better with a cash cushion during the turmoil.”
  • “No, why react to every event? Stay the course.”
  • “Shorter term trades. Buying highly rated big caps and then selling short-term calls expiring less than six weeks later.”

Everybody has an opinion! Why not give us yours? Participate in our weekly member poll, updated every Monday, and see the results online at http://www.aaii.com/memberquestion.

 

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