Will Politics Crash the Stock Market?
There's a lot happening in the world and in the US right now but the stock market $SPX500 seems not to care at all. Are political events going to crasht the stock market?
Last year, I made a video saying that the market will not crash before 2021. It was based on narrative economics, something that Robert Shiller wrote in his new book. Today, it is very easy to influence the markets with tweets or just saying something on CNBC. Donald Trump is probably the greatest salesman in the world.
Like any other politician, President Donald Trump, wants to be reelected but he's basing his reelection on the stock market being at all time high. But now, he has lost control on the markets.
The person with the most power to influence the market is Jay Powell. He can print as much money as he wants. But printing money by Quantitative Easing is not sending the money to people who need it. The money is going to people who owns financial assets and this creates a wealth gap. This is why there are protest and riots. Racism and police brutality are only triggers. Everything has to do with economics.
Ray Dalio has been talking about that for years. The wealth gap will lead to domestic and international unrest.
The stock market market cap to GDP ratio, also known as the Buffett indicator, is at 150%, which is a record. It seems that there is a bubble in the stock market.
If the Fed leaves, everything crashes. The markets are now dependent on the Fed printing money. The Japanese Stock market is already dependent on the Bank of Japan as they own most of the ETFs in the country. There was no inflation in Japan but that doesn't mean that there won't be inflation in the US. Americans love credit more than Japanese.
Another political event that will affect the stock market are elections. Wall Street doesn't really have a problem with Joe Biden or Trump but Wall Street will have a problem if the House and Senate goes Democrat too. There will be many anti-capitalist laws. Who Joe Biden chooses as vice president is also important.
Another political event that can crash the market is antitrust probes against big tech. The top five companies, Apple, Amazon, Google, Facebook, Microsoft, contributes the most to the S&P 500. If they have antitrust probes against them, the market crashes.
As investors, what we need to do is think long-term. Nobody knows what will happen. We need to build a portfolio prepared for anything. For example, 5G will happen whoever is president. Politicians think in election cycles, usually 2 or 4 years. You need to think in long-term cycles and be globally diversified.
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