Rick Pitcairn, Chief Global Strategist at Pitcairn Financial Group, discussed various investing themes with Quartz in their “Smart Investing” video series. Below is an edited transcript of the conversation.
Andy Mills (AM): Trump has selected J.D. Vance as his VP choice, and Vance has collaborated with Elizabeth Warren on some Wall Street legislation. Should investors see this as positive or negative?
Rick Pitcairn (RP): It’s early to tell. Key figures in the Trump administration like Laffer and Steve Moore are more pro-Wall Street. There might be internal debates to determine the final policy. The political fervor is high right now, and we’re advising our investors to focus on their long-term goals and navigate the market with objectivity, which is challenging after a tumultuous few days.
AM: The market has been strong this year. Is that likely to continue?
RP: Historically, a strong first half often predicts a positive second half, though perhaps not as robust. Additionally, the S&P 500 hasn’t experienced a down year during a presidential reelection year since 1944, as the current administration tends to boost the economy. This makes it unlikely for major changes before the election.
AM: With the political climate favoring Trump, how should investors prepare for a potential Republican executive branch?
RP: It is rare for presidential elections to drastically impact capital markets at large. However, sector-specific impacts can be observed. Financial stocks, for instance, have been performing well post-debate, as they tend to under Republican administrations. Investors might see shifts in green energy or Mexican-keyed stocks under different administrations. While tactical adjustments can be made, it’s crucial to maintain a long-term portfolio structure and not overreact to short-term political changes.
AM: Trump has indicated he would not reappoint Jerome Powell as Fed chairman. What would a less independent Fed mean for the markets?
RP: A less independent Fed would be detrimental. Independence is crucial for a healthy American economy. Trump appointed Powell hoping for more rate cuts, but that hasn’t happened. Keeping monetary policy too lenient for political reasons poses risks to our currency and markets. Since 2009, we’ve had an easy money policy, and with a significant deficit, maintaining global confidence in the dollar and treasuries is essential.
AM: Where should investors allocate their funds currently?
RP: As long-term strategic investors, we recognize the S&P 500’s significant growth and the concentration in top stocks. There may be a slowdown. Diversifying away from top-performing stocks is wise. International equities, real assets like gold, and infrastructure can balance a portfolio. Even though these may not outperform the S&P 500, they provide necessary diversification. Chasing momentum can be risky as markets will eventually correct, so it’s important to be prepared.
Thank you very much, Rick.