When it comes to politics these days, most would probably agree that the nation is openly divided right now, especially since President Trump took the oath of office. Trump has been quick to claim credit for the improving economy, although not everyone agrees. In the eyes of some, he will never be able to do anything right. On the surface, the nation seems obviously split down party lines, but how does this split impact investing decisions? A recent study reveals that U.S. investors are indeed divided when it comes to their political views, such as on the Trump tax cuts, but these opposing political views have little to no impact on their portfolios.
In January and February, Spectrem Group polled 1,170 people who make most of their household’s day-to-day financial decisions and have a net worth of at least $100,000, excluding their primary residence. Most respondents had a net worth of more than $1 million and were retired or semi-retired. The study covered various topics related to the political climate, economy, tax cuts, and related investment behavior, and Spectrem released the results in a report titled “Politics, Taxes and Investors’ Changing Attitudes.”
Drawn by Trump theatrics?
More than half of respondents said they were more interested in politics now than they were in the past. Interestingly, the split of investors who want to see Trump’s administrations succeed and those who are watching the political scene because they want to see him fail was about even. This finding suggests that at least some of the investors who expressed a greater interest in politics now could be drawn in various ways by the theatrics that have marked the White House since the Trump family moved in. Those theatrics are well-documented by the president’s own staffers.
For example, former FBI Director James Comey told BBC Newsnight recently that he doesn’t think anyone can control the president’s impulsive behavior. Additionally, CNN quotes an unnamed source on Trump’s upcoming meeting with North Korean leader Kim Jong-Un as saying that if the president walks out of that meeting in the middle of it, it would provide a “Trumpian level of theatricality.” The quote was in reference to the president’s claim that he’s ready to walk out of the North Korea summit suddenly before it’s even over if the meeting “isn’t fruitful” while he’s in it.
American approval of Trump tax cuts appears skewed
One of the main questions respondents were asked was whether or not they approve of the Trump tax cuts, and Spectrem found that a 43% of the investors polled said they wither “somewhat” or “significantly” supported the tax cuts. Thirty-five percent said they didn’t support the Trump tax cuts, while 23% said they weren’t sure how they feel about them. As with all studies dealing with politics, it’s important to note the mix of views represented in the study.
Spectrem said 37% of respondents said they were Republicans, while 34% said they were Independents, so Democrats did not make up either of the top two groups represented in the poll. Given President Trump’s controversial, impulsive and divisive behavior, it seems possible that many of those belonging to the Independent category could be leaning toward Republican views, but not wanting to claim loyalty to Trump.
For comparison, FiveThirtyEight examined studies conducted by Quinnipiac University, CNN, YouGov, ABC and The Washington Post, and Morning Consult, and the average of those studies suggested that the Trump tax cuts are hugely unpopular. With all the headlines blaring expectations for a rapidly-ballooning deficit that threatens social benefit programs and declarations that only the wealthy are benefitting from the Trump tax cuts, it’s no wonder that American approval of it seems skewed toward investors with a higher net worth.
Economy also discussed
The poll also included questions about investors’ view of the economy, and nearly 75% said they’re benefiting from the so-called “Trump bump” and feel that they are in a better financial situation now than they were last year at this time. Over 65% said they expect their situation to be even better next year.
As far as the bull market goes, nearly 50% of investors expect the Dow Jones to close between 26,000 and 28,999 at the end of this year. Spectrem also said that “a large percentage” of them expect the bull market to last at least one or two more years, which would mean that they’re looking for a new record in terms of bull market length.
The current bull market for stocks has been going on since March 9, 2009, USA Today reported last month, and in order for it to beat the current record for the longest bull market, the stock market must go another five months without falling 20% from the record high recorded in January. The current record for the longest bull market was during the 1990s until the popping of the tech bubble in 2000.
Political views have little impact on portfolios
According to Spectrem Group, the factors most likely to affect investors’ likelihood of enjoying investing and being involved in managing their portfolios are the size of their wealth, their occupation, and their political affiliation. However, the firm added that investors worry about the same things, not matter what their political affiliation is: having enough money to retire when they want to retire, caring for their families, and having enough money to last them until the end of their lives.
Spectrem added that while financial advisors may not want to ask clients specifically about their political views, understanding how clients think can help advisors ask the right questions as they manage their portfolio. However, the firm also found that political affiliations don’t really make much of a different when it comes to the makeup of each investor’s portfolio. Thus, financial advisors may find that, when it comes to investing, the obvious split along party lines means very little because at the end of the day, every investor cares about the same things.