Impact of Political Risk (Trump) on your Investment Performance

Coffee
63

Indeed, an expensive hobby for most :wink:

64

That is correct.
At least for me.

But for me, it’s not about market situation but concentration in general. I am questioning myself if it’s wise to have 60% of my equity exposure to one country (mainly from risk management perspective).

Current market conditions might make this concern more deep but I think this concern would exist even if US was trading at standard valuations.

65

Actually I think it’s not driven by belief in US per se. I think it’s driven by conviction in global market weighted funds & simplicity even though it drives >60% exposure to one country

66

Is there an alternative which is as cost-effective and efficient as buying VT and the like?

/tongue in cheek/ Also, sure it’s a hobby, it has to be, otherwise, you know, we’d spend the money on actually fun hobbies. I mean it’s miserable to be well off and live far below one’s means, sort of like money monks longing for the day that this, all of this saving and worrying about basis points, the news, work etc is behind, but in today’s world it’s necessary.

67

Outside of 3a I don’t think there is but not 100% sure.

Yes, but getting back to the thread topic; I also think about political implications and the like but what am I going to do about it? Reducing/increasing exposure and thus deviating from the index is definitely an active approach, be it only for peace of mind. (Although the scientific definition of “active investing” is trying to beat the index)

I also personally believe that there are enough bright minds in the US, driven by money and influence, to steer the country in the right direction, no matter which president they have.

1 Like
68

Not sure. I guess every now and then (once a year?), I’d revisit my choice and rebalance if needed.

69

Same.

1 Like
70

Meh, other empires have fallen to decadence and division. Bright minds with means be damned.

I personally think, betting on value will pay out in time. “MSCI World Enhanced Value” for example is not constrained by coutry weight of the parent index. The US allocation shrinks to 40%. Would be even lower if it was ACWI instead of World, but I didn’t find any ETF.

1 Like
71

I think history tells us that this is not necessarily enough.
There were many great empires, that have all fallen, even though they contained the best of the best minds.
It just takes a series of bad rulers with enough power to topple any great nation.

3 Likes
72

This is interesting

US real market cap weight is about 42.5% globally but because most indexes track Free float, it inflates US weight to 60-65%

So if there was an index which adjusts for this effect, could have been easier.

73

I want to say one thing

Deviating from MSCI ACWI doesn’t make anyone active. In my view all of the following are passive.

  • 100% VOO
  • 100% VTI
  • 100% VT
  • 50% VTI + 50% VXUS
  • 34% VTI, 32% CHSPI , 34% VXUS

Even the founder of vanguard didn’t invest in international markets. He was not considered active investor.

The difference between all of the above is what is your benchmark and which market beta you are trying to achieve. I believe there is a fallacy in assuming that only passive approach that exist is investing in MSCI ACWI index. In fact in US, most people only invest in VOO and call themselves passive. In India they invest in NIFTY 100 and are passive investors in their view.

In summary -: Strategic Asset allocation is not the same as active stock picking. But if asset allocation is changing all the time , then yes it is active asset allocation.

2 Likes
74

I dont remember exactly where i read it, but

The historic PE may not be comparable 1:1 to todays PE ratios, due to changes in accounting standards etc. Not sure if the figures are already corrected, but certainly something to keep in mind.

Regarding all the discussion stocks might drop:
Yes, they could. But they could also double over the next 7 years. We simply do not know.
Sitting on a large bond (or cash) allocation with high and increasing levels of debt doesnt seem very lucrative either. So whats the alternative?

Edit:

75

Totally agree with you two. I don’t think it’s a problem of if it will happen but rather when will it happen. Until then, as I don’t think I can foresee the crash of an empire, my realistic approach is the answer that I wrote. Believing that good will prevail evil and if not, that hopefully VT is rebalancing correctly and that a possible new leader in terms of economic power gives the public access to their companies (looking e.g. at China/India).

1 Like
76

So now we know, though bad (and wrong) use of the word “regime”.

77

Now the GOP has regained control of the Senate, import tariffs seem more likely.

1 Like
78

We seem to (almost) have a winner, enjoy the bull run while it lasts.

79

NZZ declared Trump as the winner it seems.

80

VWRL nearly 3% up with the open. Oh well, won’t complain.

81

@Your_Full_Name - re market gains have occurred under both parties - interesting chart, would be even more interesting (?) to see a parallel graph with budget deficit / national debt during those years.

82

I thought one of the most interesting but ‘underreported’ moments in recent months was a meeting between Zelesnky and Trump where Zelensky said:

  • We used to have nukes and gave them up in 1990’s in return for security guarantees which turned out to be useless
  • So, either we join NATO or we will develop nukes

Trump’s response was: fair assessment

I was not impressed with Harris but still preferred her to win over Trump. Having said that, I do not believe Trump is the ‘idiot’ that so many Europeans think he is. He often uses strategic ambiguity (i.e. purposefully coming across as an unpredictable hot head) as a tool to gain an advantage in discussions/negotiations. He’s not going to exit NATO, he just wants Europeans to pay more. I suspect he’ll hang a deal in front of Putin and Zelensky which is a loss for both but a win over all. E.g. Putin gets to keep land but Ukraine can join NATO.

Back to politics, I am more concerned about Trump having a heart attack and Vance becoming POTUS. That guy reminds me of the Manchurian Candidate


Stock portfolio wise


  • US stocks near term bump up due to tax cuts
  • But I’d not be surprised if in due course the world (incl, US) will be pushed into a recession due to tariffs, trade wars, etc. causing havoc on consumers
2 Likes