Don’t Let the Fed (or Politics) Impact Your Investing Decisions

A few weeks ago, I wrote about whether the pending impeachment inquiry would–or could–impact the markets. While I do tend to stay away from talking about things like the Fed or politics, I may make some exceptions over the next year or so, especially as we move towards next year’s elections. As you may well know, the Fed lowered interest rates again last week, which was the third time they’ve done so since July. This move will impact the markets, but by the time you figure out what that impact will be, the markets will already have reacted and you’ll be well behind that. Instead, don’t get too worried about Fed policies and decisions and focus on making decisions that work for you. That means focusing on your own risk appetite and investing companies that you truly believe will help you meet your goals. The same can be said for following politics, especially in an election year. Candidates from both parties will say a lot of things regarding economic policies and plans–some of which may impact the markets–but you shouldn’t let that sway your retirement plans here and now. Yes, you can pay attention to what they are saying, but you shouldn’t use that information to make investment or retirement plan decisions. With all that said, I am encouraging you to be informed, but to also be aware that what you hear doesn’t need to be acted upon.

Politics and the Markets

I don’t like to talk about politics in this blog as it really doesn’t have any impact on retirement or building up a nest egg. However, given the impeachment inquiries going on at the moment and the brawling that is just beginning regarding them, it may be wise to at least discuss whether such proceedings can have an effect on markets. While there is very little data on such matters, the what little info there is doesn’t show that the markets are swayed by partisan happenings on Capitol Hill. For example, the stock market continued to skyrocket during the Clinton impeachment proceedings–driven largely by the dot com bubble. In 1974, however, the stock market did take a small dip right after Nixon resigned, but rebounded in 1975. Therefore, regardless of your political leanings, you probably don’t have to worry about an impeachment ruining your portfolio. That doesn’t mean though, that you shouldn’t keep abreast of current affairs. Also, this is a reminder to keep politics out of your investing decisions when it comes to your portfolio. While some politicians may claim to have the ability to impact the markets, there doesn’t mean that the markets will react as they claim. If anything, you should pay attention to foreign policy moves and economic decisions (i.e. decisions regarding trade pacts, the federal reserve, etc.), which often do impact markets and can have a wide-ranging affect on your investments and portfolio. So, in short, don’t let the impeachment proceedings impact your retirement planning or investment strategy (I don’t think it would anyways).