Despite an ongoing onslaught of negative political information, do investors really believe that politics are as bad as the media portrays? Maybe – sort of….but do they care? Keep in mind that the market is at an all time high. Maybe that can help us to place investor attitudes into perspective. More importantly, why are investors worried about politics and how important are politics to investor attitudes?
According to Spectrem Group’s monthly Millionaire Investor Confidence Index in September of 2017, 20% of investors felt that the political climate was the “most serious threat to achieving their financial goals at this time”. This is down from 30% in March of 2017 and ties with what investors felt in December of 2016. These numbers are high when compared to recent years, but how do they compare to the past?
The last time investors were as concerned about the political environment was in December of 2012 when Congress was threatening to let the country “fall off of the fiscal cliff.” Concern over the political environment threatened the financial goals of 26% of investors at that time. At that point, Congress ultimately came to a shaky agreement and the economy moved forward…..in a similarly shaky kind of manner.
Until approximately 2008, the political environment did not even appear as a threat to investors. In fact, at the end of 2007, only 12% of investors were worried about the political environment. A year later, at the end of 2008, that percentage had dropped to 8%. In contrast, however, 28% of investors were worried about the Economy, 19% worried about Market Conditions and 15% feared Unemployment! This was in the midst of one of the worst financial crises the country had ever experienced. In contrast, in September of 2017, only 8% of investors were worried about the Economy and 14% were worried about Market Conditions and Unemployment did not even appear as a factor influencing one’s investment and financial goals.
Despite the fact that investors are more worried about the political situation today than in the past, how much does it really matter? Do politics matter more than one’s confidence in the Economy or the Market Situation?
Based upon Spectrem’s research regarding investor confidence the answer is a resounding “no”. In September of 2017, the Millionaire Confidence Index was at 19. This was down from the highest level of 26 in April of 2017 but still near the all-time highs post-Recession. In November of 2008, when the Economy and Market Conditions were the biggest threats to investors, the Millionaire Confidence Index was at its lowest level of -39. That’s significantly different than the results in 2017.
In qualitative research completed by Spectrem, the results indicate that despite one’s political affiliation, market conditions allow investors to overlook politics:
“I hate the guy but I like what is happening to the market.”
“The biggest threat to the market is Congress and their incompetence.”
“I think Trump has done a good job and the markets reflect that.”
While investors may complain about the Political Environment in 2017, clearly their appetite for investing and their fears about their financial futures are very different than they were ten years ago. Identifying the Political Environment as the greatest challenge to one’s financial future is better than identifying the Economy or Unemployment as a financial risk.