New research shows investors' politics are shaping their portfolios
There is currently a 47 percentage point gap between Republicans thinking stocks will rise in the next six months compared to their more bearish Democrat peers. Meanwhile Democrats who expect stocks to fall over the next six months exceed Republicans by 59 percentage points.
It is the largest sentiment gap on the stock market's trajectory since 2001, according to Gallup data. This 'optimism' gap is leading both political persuasions to make different trading decisions. Wealthy individuals who voted red or blue are also increasingly buying different stocks, The Wall Street Journal reported.
Investing $1,000 in 1953 but only holding stock when a Republican was president would yield $29,000 today, according to Paul Hickey at Bespoke Investment Group. Doing the same but only investing when a Democrat was in the White House would roughly double the sum. However, neither strategy would beat simply buying and holding throughout the entire period, which would leave the investor with $1.9 million today.
The divide between Red and Blue voters' portfolios began in 2013 under Barack Obama's presidency. The gap continued to widen in the following years following Trump's election in 2016, according to Elena Pikulina who collected and studied data from more than 300 independent investment advisers. 'If I know how people voted, I could tell you how they feel about the stock market,' David Sadkin, partner at Bel Air Investment Advisors, told the Journal.
Sadkin recalled how one of his wealthy clients, who do not approve of the President, inquired about moving all their assets abroad because they were afraid they would sink under Trump's second term. On the other hand, Trump voter Bruce Besten, 68, told the Journal that he believes his investments will do well under the current administration.
'In general, when a person with his mindset is in office, it's good for the business environment,' the restaurant owner from Louisville, Kentucky explained. 'What's good for the business environment is good for the stock market.' He told the outlet that media 'hype' about how tariffs would batter the economy created buying opportunities for him during the market collapse in April , when he bought American stocks including Nvidia.
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