Scott Kahan: Drown Out the Political Noise from Your Portfolio

Scott Kahan: Drown Out the Political Noise from Your Portfolio

Scott Kahan, Certified Financial Planner ™ professional and President of Financial Asset Management Corp. in Chappaqua and NYC, discusses the importance of drowning out political noise from your investment decisions.

Are we coming down from the shock waves of the new Trump administration?

The VIX has. My clients—not so much.

Let’s start with the VIX… 

For those not familiar with the VIX or Volatility Index, it is a barometer on market volatility measured by the Chicago Board Options Exchange (CBOE). It’s sometimes referred to as the “fear gauge.” It doesn’t measure past price swings but expected swings implied by S&P options trading activity.

As it relates to VIX action this past spring, in layman’s terms, “What is Trump going to say next?” And more specifically what is he going to say about tariffs.

I hate to relive the recent past in the markets, but can you take us through it?

So, the day after the Trump inauguration, the VIX closed at 15.06—a hair under its 2024 average. On the morning of “Liberation Day,” the day he announced his tariff plans the VIX had already risen to 21.5. Twenty-four hours after the market had time to digest Trump’s news, the VIX jumped to 30 and rose to 52 by April 8.

Hair on fire…

In the wake of Liberation Day, the S&P 500 dropped from 6148 to 4982 almost 20%. A major correction.

And now?

After Trump backed down and paused the tariffs for 90 days the S&P regained all it lost and just closed at 6280-record territory. Meanwhile the VIX has dropped to 16.

But your clients are not over it yet?

Many of my clients have not even looked at their portfolios in months and are pleasantly surprised when they see where they are today. But they’re still jumpy. And the market is too, although people now call him TACO Trump—meaning he “chickens out” of his threats—my clients still get unnerved when he talks tariffs. As does, the market. It still reacts to tariff threats but not as much.

So, Drown out the Political Noise?

It’s tough because Trump plays with tariff threats to unnerve trading partners which in his mind makes brilliant sense. The problem is that it unnerves investors and even market professionals. Because you can never rule out that he really means it this time. I call it self-inflicted wounds from a President who has inherited a good economy. It seems to me that things would be better off for everybody including himself if he just let the markets play out.

You’ve always said the same thing about market prognosticators…

The lesson is always the same. Block out the talking heads on tv who try to forecast the market because you can’t time the market. Stick to identifying your financial goals—be they retirement, saving for college, buying a second home. Set your financial plans to help you reach those goals. Review your portfolio twice a year and rebalance your asset classes back to your desired allocations when one or the other class has had a run up. This is the way to ensure that you’re selling high and buying low instead of the other way around.

And refocus on the fundamentals…

Always. The economy is in good shape. and there’s not a lot to fix. Unemployment remains low. Inflation has come down. Jobs are being created, and the consumer is spending. Try to block out the White House message machine. The long-term trend in the market is up. Whether there is a Democrat or a Republican in the White House. That doesn’t mean it’s always up. Corrections happen. Recessions happen. But recessions are short lived. Market trends are long term.

Try to keep your emotions out of investing.

Financial Asset Management Corporation has provided fee-only financial planning and investment management services for individuals and small businesses in the Tri-State area since 1986. They serve 175 clients and manage over 390 million dollars in assets. (26 South Greeley Avenue, Chappaqua, NY, (914) 238-8900; www.famcorporation.com )

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