Market Watch: Wall St has a history of ignoring political turmoil – can it last?

In the final episode of the long-running video show Market Watch, Pie Funds chief investment officer Mike Taylor and Liam Dann look back at how equities have performed through a tumultuous decade.

Market Watch began in September 2016 with share markets still in a long bull run, underpinned by a period of low interest rates.

It followed the turmoil of Donald Trump’s first term, including the 2018 trade war with China that sparked a big Wall Street sell-off.

Then, in 2020, Market Watch tracked the big Covid slump as lockdowns hit (and we recorded from our spare rooms).

The slump was short-lived, with stimulus coming to the rescue and markets surging to record highs through late 2020 and 2021.

Since then, investors have had to ride out an inflation-driven slump and then seen a steady comeback driven by soaring tech stocks – AI chip maker Nvidia leading the charge.

Through it all, a key message for Taylor has been that markets are less susceptible to political turmoil than we might think.

Despite all the social and political changes in the past nine years, the S&P 500 index is up 160% since September 2016.

But, with a new Trump term really shaking up the established order, can that growth continue?

“It’s very difficult because we are talking about trying to predict the mindset of one individual or a couple of individuals who are making very strategic decisions about, you know, the fate of the world,” Taylor said.

“So it would be remiss of me to try and make a prediction as to which way they’re going to swing.”

But Trump and his inner circle were “very markets focused”, he said.

“They don’t see like seeing the value of the stock market go down in their own investments.

“We saw that very recently with Donald Trump buying a Tesla in front of the White House to support his mate Elon Musk because the stock price had gone down.

“They won’t want to drive the country into a deep recession or see the stock market fall. So let’s think about it from that perspective.”

Looking out further, investors had to rely on what we learn from history, he said.

“Which is that markets generally go up over the long term.

“We’ve got AI [artificial intelligence] in the background, which we know will bring efficiency for markets and drive up companies’ profits over the years to come,” he said.

“So I’m sure there’ll be lots more turmoil and volatility in years to come but, for the patient investor, there’s money to be made.”

The Market Watch video show is produced in partnership with Pie Funds.

Liam Dann is business editor-at-large for the New Zealand Herald. He is a senior writer and columnist, and also presents and produces videos and podcasts. He joined the Herald in 2003.