In the complex world of investing, one of the most challenging situations investors face is predicting how political actions will impact the markets and ultimately them financially. Political decisions, whether through fiscal policy, trade negotiations, or regulatory changes, often create short-term volatility. While this volatility poses risks, it also presents opportunities for businesses to pivot, adapt strategies, and enhance their success. However, investors, especially those removed from the day-to-day operations of companies, often struggle to predict how business owners will react to these changes.
The Andrews Group worked with many business owner clients, some for almost 40 years. Watching over these entrepreneurs adapt, adjust and in some cases reinvent their business strategies has been truly amazing. Business owners—whether of private or public companies—are deeply embedded in the specifics of their operations, markets, and competitors. They possess intimate knowledge of their industries and are constantly adjusting their strategies to respond to political shifts. For instance, if tariffs are imposed, a business owner might look for alternative suppliers or adjust pricing strategies to mitigate the impact. Investors, on the other hand, often only have access to high-level information, such as news reports and quarterly earnings, and cannot make the same granular adjustments.
Presidents, especially in the U.S., can significantly influence markets with decisions on taxes, trade, or regulations. A shift in tax policy can dramatically affect corporate earnings, while tariffs may disrupt global supply chains. These decisions often lead to knee-jerk reactions from traders and analysts, resulting in market fluctuations. Business owners, however, are more attuned to the complexities of their operations and are less likely to panic. They actively shape their responses based on what they know, rather than reacting solely to external news.
This difference in knowledge and perspective highlights the risks of trying to predict how business owners will respond to political volatility. Investors who attempt to second-guess business owners often miss key factors like innovation, customer loyalty, or strategic partnerships, which can mitigate the impact of political decisions. While investors might focus on macroeconomic issues, business owners are focused on solving the immediate, specific problems that arise from those factors.
Volatility is not inherently bad. While it can create uncertainty, it can also lead to competitive advantages for certain businesses. Business owners understand that political changes often create new opportunities to innovate or adjust operations. Investors, by contrast, may be more focused on short-term market movements or analysts’ opinions and may misjudge the business’s resilience or its ability to adapt.
Rather than attempting to predict how political decisions will unfold, I would suggest that we trust in the ingenuity and adaptability of business owners. These individuals have the knowledge and motivation to navigate volatility and keep their companies successful. By focusing on long-term fundamentals—such as strong leadership, competitive advantages, and market position—investors can be confident that businesses will find a way through political turbulence.
Investors, by trusting in the market, the adaptability of the underlying businesses and the ingenuity of the business owners can successfully weather political storms and market fluctuations, which ultimately will ensure greater financial success and prosperity.
Mike Andrews
RFP®, FCSI®, CIM, CEPA®
Wealth Advisor
