I will share a few thoughts on the market at the end of this post, but I wanted to address a poison I am seeing out of a few of my students. My students are letting their political views affect how they trade the market.
I was speaking to a student today. All he could talk about was "How can the market hold up long term with socialism happening blah blah blah blah..." I don’t disagree with him; however, none of this has to do with how traders should approach their trading positions. Traders deal in short bursts and short time horizons. Politics does not.
Political fiscal policy takes 5-10 years to affect the stock market and really affect the economy (I still contend the late nineties were because of Ronald Reagan). More importantly, there is little rhyme or reason as to what happens in Washington DC. There is even less of that in the market place. It is hard enough to navigate the market place when we have to listen to the cheerleaders over at CNBC and FBN. Imagine trying to trade in a world where one allows Beck and Maddow to affect trade decisions. I am almost certain that it will hurt the returns of a trader.
Essentially, I don’t care what is going on in DC or what is socialist movement is going to happen to the country.
If you are like most traders, you are trading a one to two month timeline. These things matter very little. Political Volatility does not mean market volatility. Dislike of the current administration does not mean a selloff. Glenn Beck knows about as much about finance as I do about being loud and opinionated (oh wait forget that last part:-)
What should do?
As far as the market today, the G20 stimulus was a pretty big deal. It basically means the rest of the world will allow us to keep interest rates at a very low level. I think the VIX will finally break under 20 this month, likely heading into the Thanksgiving holiday. I am looking at some very short term iron condor trades, but I don't see anything I love yet.
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