How to cope with incredibly noisy markets

Protests against Donald Trump © Getty Images
None of this political noise is going to go away

Just when it was getting quiet for five minutes, the headlines are full of Donald Trump again.

Trump’s done this. Theresa May should have done that. The Queen’s not happy. The markets are worried.

What’s an investor to do?

Put simply: ignore it.

Trump on, Trump off
Donald Trump has caused chaos at airports in the US and protests around the world by temporarily banning visitors from seven countries – Iraq, Syria, Iran, Sudan, Libya, Somalia and Yemen – as well as barring refugees. He then fired the acting attorney general when she refused to defend the ban in court.

It’s messy. It’s also another clear reminder that Trump was serious about his pre-election promises. And it’s also a warning for anyone who hoped that he’d perhaps try to ease himself gently into the job of “most important politician in the free world”.

It also has an effect on the market. When Trump got elected, investors seemed to be focusing on the upside (tax cuts! More spending!) and weren’t considering the downside (protectionism! Micro-management!). This sort of thing makes the downside a lot clearer.

And one of the big problems with all of this is that it makes you feel like you should be acting. There’s so much noise, so much shouting, so much hysteria.

“The Trumpflation trade is on. The Trumpflation trade is off.”

What can you do?

The political noise is only going to get louder

Get used to it.

I hate to say this, but none of this political noise is going to go away. Trump is just one of many noisy political issues out there.

I can tell you now that he’ll dominate the headline for months to come. His actions so far suggest that he is hardly likely to bed in quickly. He’s not a consensus builder, he’s a blower-upper. He clearly likes to march in, shake things up, and see what happens.

That sort of management style can work in a corporation, where people have actively chosen to work for you and accept you as a benign dictator in exchange for a monthly salary. I’m not 100% sure it’s the best way to run a country though.

And unfortunately, Trump is not a “small government” kind of guy either. You might get tax and regulation cuts, but you’re also going to get a lot of intervention. He’s not one to stay out of the limelight. He has courted celebrity all of his life and he’s clearly very thin-skinned. That lends itself to the prospect of plenty of “Oh Lord, what’s he done now?” headline moments.

Throw in the fact that the US is incredibly divided – so it’ll be impossible to get any sense out of the American media for quite some time – and you’ve got a recipe for confusion.

On top of that you’ve got Europe. Brexit is the least of it. The French election has been thrown wide open (again) after Francois Fillon – the right-wing candidate who everyone hoped would beat Marine Le Pen – ended up in a scandal involving his wife’s payment for working as his parliamentary assistant. As Credit Suisse puts it, the French presidential elections pose the “greatest existential risk for Europe” of all the problems out there.

That’s all without thinking about Italy, Germany, Greece or any of the other potential eurozone trouble spots.

Let’s be clear: it’s possible that none of this stuff will amount to anything at all. But you can expect it to hog a lot of the limelight and to be given a lot of credit for the various daily ups and downs in the market over the next few months.

If you’re feeling stressed, go on a news diet

As a consumer of news for entertainment, as a card-carrying concerned citizen, as someone who likes to catch up the daily gossip – you can watch this stuff all you want.

But as an investor (or as someone who likes to maintain their emotional and intellectual equilibrium), I’d advise that you actively avoid the general news. Or at least limit your consumption to specific issues and limited time periods.

If you’re a serious investor, then your investment horizon is not measured in days or weeks or months. Nor is your strategy based on who’s in charge of America or Europe – or Britain, for that matter.

So the vast majority of stuff that appears on the front pages is either irrelevant or of only temporary importance. Of course, if you own individual stocks, you need to keep yourself abreast of announcements that matter to them. But that’s what the Stock Exchange’s Regulatory News Service is for.

In terms of the big picture, the basic underlying trend remains reflationary. Whether that’s accompanied by strong growth or not has yet to be seen.

The area most at risk of a deflationary implosion remains the eurozone, primarily due to the structural problems of the single currency. But even then, there are still companies worth owning, regardless of which type of fiat money their shares are denominated in.

In short, avoid the expensive stuff, invest in the cheap stuff, own some gold for insurance, and rebalance when your asset allocation gets out of whack. And if you’re feeling jittery, put down the iPad, switch off the 24-hour news channel, and get yourself a good book.