Macro Trends/Forecasts

Jeff Miller

"The Man Who Called Dow 20,000" --CNBC

Elections and Investing

The Iowa caucuses are only seven months away!  For those who can hardly wait, you probably spent a couple of hours last night watching ten Democrats "debate" policy issues.  Ten more are on tap for tonight.  And that doesn't cover the whole field.

I"ll be providing some ongoing coverage as it becomes more relevant, but here is a preliminary observation: Markets make too much out of early-stage policy proposals.  It is yet another case of algos and traders ascribing meaning to everything.  Any piece of news must be bullish or bearish and worthy of a trade.  Then the punditry takes over to explain why it is important.

Here is an example.  Hillary Clinton spoke out against outrageous drug prices in September, 2016.  This popular topic was embraced by politicians of all stripes.  It led to a big selloff in drug stocks and biotechs aspiring to be drug stocks.  The sector has never really recovered.  Meanwhile, finding an actual impact on drug prices is quite challenging.  We don't have any legislation or regulation -- just a lot of posturing.

The market  pricing for these stocks does not reflect either the demographic changes or people's willingness to pay for life-extending treatments.  Everyone should have a basket of biotech stocks and not worry about beating the market in the short term.  This is one reason I regard Bhavneesh's contributions as especially important.  There are few people covering that space who have his credentials and experience.

Expect this example to be repeated many times over in the next year.  Astute investors focused on fundamentals and underlying trends can profit from irrational market moves.  Just do not expect to get an immediate reward!  These are investments, not trades.  I'll be on the alert for more examples as the political season plays out.

For those watching the debates, Pew did a survey about what constitutes acceptable behavior.  As is often the case, people say one thing in the survey, but their votes are nonetheless influenced by aggressive behavior.  See their entire post for more, including partisan differences.

Jeff Miller provides Economic Analysis as well as Market Forecasts as one of the original contributing analysts at FATRADER. A quantitative modeling expert and former university professor who is the #1 Economics contributor at Seeking Alpha, Jeff is regarded as an expert on economics, market reaction to news events, and computer-based trading.
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