In an ideal world, there would be separation of political noise and stock market movement. Yet unfortunately, this is the phenomena of signalling theory: when noise effects the way investors think about products, despite knowing little about the source of the noise.
This week, we can anticipate political ‘to-and-fro’ to be a big factor. However, if we know it’s coming, then there is no need to be alarmed. Noise dissipates. Stock markets learn.
The USA Republicans will dominate headlines as they prepare to backflip on an original backflip by imposing tariffs on Canadian, Mexican and EU steel and aluminium (all these countries had previously been offered immunity). China, the supposed ‘cause’ of all this trouble, has avoided tariffs and slipped under the radar, which is no mean feet for a country of 1.4 billion people.
Elsewhere, the Italians refuse to be outshone: with the FIFA world cup around the corner, the Italians, who are notable absentee from the tournament, decided to turn up the heat in European politics instead. After months of deadlock, the anti-EU party, Five Star Movement, and the equally rightwing, League party, finally agreed that they all disagreed with the current status quo, and managed to form a coalition government. However, the prospect of any radical legislative changes appears very unlikely, especially with the World Cup kick-off only a fortnight away.
And back home, Pauline Hanson created further confusion about the prospect of corporate tax reform, by omitting Fraser Anning from the her One Nation party. Fraser Anning had been an advocate of corporate tax reform, however, Hanson had recently changed her mind, opting not to support it.
My tip: let’s save the nationalist pride for the soccer pitch and instead employ the Ascent Private Wealth model for our investing: composed, rational minds and diversified investments. The last thing you want, is to see red.
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Mark O’Toole CFP™