In the three months since Election Day, the markets have undergone a decided move to the upside. The S&P 500 Total Return Index is up 9.2% in that time frame. However, the trading action that led us here has been anything but uniform.
As we see every four or eight years, capital tends to rotate into stocks and sectors that are likely to do well under the new administration. This cycle, we’ve seen financials, industrials and defense stocks in particular shine as the new Trump administration promises less regulation and more spending in these key areas.
But we’ve also seen a wider array of stocks benefit on the promise of corporate tax reform. The mere hint of a forthcoming "big league" plan just sent the three major indexes simultaneously higher five days in a row from already-record levels. The last time we saw action like that was January 1992, when the S&P 500, Dow Industrials and Nasdaq notched six days of consecutive records.
The point here is that when it comes to most investments, politics is a minor factor. Rather, it’s the result of the politicians and their actions that could make an investment more or less valuable.
This is true of stocks, bonds and most commodities … unless that commodity is gold. Which may be enjoying a bit of an unusually bipartisan bump these days.
Gold has a reputation as being an investment for more conservative or libertarian types. But that all seems to be changing now that Donald Trump is president, according to a recent article at the website Energy & Capital. in which the author Luke Burgess observes:
"Gold is a fundamentally conservative investment vehicle. It’s a tool for the preservation of labor. And there is no doubt that the metal appeals to those with a conservative mindset — politically, socially, and economically.
"For the most part, liberals view gold as a relic of monetary history. The general idea is that gold’s importance is only what you make of it. That is to say, gold can be valuable as a metal for jewelry or technology, but it has no monetary value. In short, gold is not money to most liberals."
Obviously, there’s no true benchmark of who bought more gold pre-election vs. post-election. So we’ll never really be able to track the party affiliation of longtime owners vs. new buyers.
But if you look at the "paper gold" market … where some $1.6 billion found its way into gold ETFs in January 2017 alone … it’s certainly fair to say that a good chunk of that "new" money is coming from people who are looking to buy some protection and peace of mind.
Those are two of the best reasons to buy gold, no matter what’s happening in the world or what day you’re buying.
The timing, however, is certainly intriguing.
Burgess goes on to say that:
But that could be changing … And it has everything to do with Trump … The far left is freaking out over Trump. They are completely losing their sh**.
While we do know that a lot of people, not just those on the far left, are concerned about Trump, we’re not sure if that means they’re turning to gold. But Burgess goes on to address that thought, giving us the following analysis:
To the liberals, [Trump’s] a selfish brute who doesn’t care about those long-term economic consequences. And they’re freaking out about what to do with their money.
Burgess then related a story of someone he talks to on a regular basis who is both liberal and very worried about what a Trump administration is going to do with the economy. This man told Burgess:
“Never in a million years did I ever think I’d want to own gold … now I’m considering it.”
Of course, Burgess admits that this is merely one anecdotal example of someone on the political left who is, for the first time, considering buying gold. Yet this may beg the question…
If this is the case, then might that mean a sort of “liberal tailwind” is helping gold to move higher?
Burgess thinks so, writing:
Are the liberals becoming so afraid of what they think Trump could do to the U.S. economy (as well as to geopolitics altogether) that they’re now, for the first time in decades, willing to accept gold as a legitimate storage of wealth?
And if so, consider how much that would open up the gold market to new investors. As unexpected as it might be, the far left may even turn out to be the group that sends the gold market into mania.
Since Inauguration Day, gold prices have gained 2.5%.
That’s a move that’s got many buyers interested again, and not just the Johnny-come-lately lefties worried over what Donald Trump is going to do.
The bottom line here is that demand for gold could soon be increasing from a most-unlikely source — Trump haters on the left side of the political spectrum.
If that group starts, or keeps, buying … then we will look for gold to get a renewed political shine.
The Uncommon Wisdom Daily Team