2017 was the year that truly highlighted the importance of ignoring the media when it comes to your finances. The reaction to Donald Trump being elected President prompted all manner of hysterical forecasts and pearl clutching by those opposing him. Something that also occurred when Barack Obama was elected in late 2008.
To highlight the phenomenon of ‘searching for’ or ‘catering to’ negative Trump stories, the more left leaning MSNBC cable network posted a 50% increase in total viewers during 2017 as they almost wholly focused on Trump, his administration and any calamities or scandals that would titillate those desperate to hear about them. Again, a strategy that worked to boost the viewership of the right leaning Fox News after the election of Barack Obama.
In Trump’s case though, the media interest was almost unprecedented, possibly due to his fame, his behaviour or just because he seemed an anomaly in the political environment. Keenly aware, Trump and the Republican Party obviously wanted to capitalise on the failed forecasts of doom and with their 2017 Fake News Awards.
At number 1 was prominent economist Paul Krugman who, during the immediate downward market plunge in reaction to Trump’s election, said: “It really does look like ‘President Donald Trump’ and markets are plunging… If the question is when markets will recover, a first-pass answer is never.”
Krugman also predicted Trump’s election would bring about “a global recession with no end in sight.”
Krugman is a Nobel Prize Winner in economics and a columnist at the New York Times. His reach is far and wide, so these statements were incredibly irresponsible. In the aftermath of an unrelenting run on US and global equity markets Krugman has now suggested Trump can’t take any credit. This is something that we’re happy to partially agree with, as there was a recovery well underway and investors should always be prepared to look past politics when investing. However, the Trump tax cuts did add fuel to the equity fire.
Yet Krugman was happy to pin an equity market crash upon Trump ahead of time. And if Krugman wants to play that game, Trump’s either responsible or he’s not. He can’t only be responsible for any potential downside. This highlights how irrational things become when partisan politics intersects with financial market returns.
Who knows how many on Krugman’s side of the political spectrum he led astray because they let his forecasts hijack their investment process. Not that this is restricted to one side of politics, there were many who believed the only way to survive the Obama years was through collecting gold and canned food.
During Obama’s term, gold’s returns were dwarfed by US equity returns, while that canned food is now out of date.
In other words, set aside the politics when it comes to money.
This represents general information only. Before making any financial or investment decisions, we recommend you consult a financial planner to take into account your personal investment objectives, financial situation and individual needs.
