Political Bias By the time we reach adulthood, most of us hold fairly strong political opinions. These can't help but shape our expectations about the future. But it's a mistake to let your political beliefs drive your investment portfolio. I told my conservative friends not to bail on stocks when Barack Obama and Joe Biden were elected. And I told my progressive friends not to bail on the market when Donald Trump won the White House. Yet many folks find this difficult. For example, New York Times columnist Paul Krugman predicted financial calamity if Donald Trump were elected in 2016, even posting this on election night: It really does now look like President Donald J. Trump, and markets are plunging. When might we expect them to recover?... A first-pass answer is never... We are very probably looking at a global recession, with no end in sight.
That sounds more like some guy yammering at the end of the bar than a Nobel Prize-winning economist. Don't get me wrong. Trade policies, regulations, taxes, government spending and new legislation all affect economic growth, consumer confidence, business investment, corporate profits and, ultimately, share prices. But commerce trumps politics. Historically, markets have done well under both Democratic and Republican administrations. You should stay invested during both. Negativity Bias This is the most powerful bias of all. And the most harmful to investors. Every second of every day we take in far more data than our brains can possibly process. Because nothing is more important than our survival, our amygdala - the brain's early-warning system - gives priority to the things that might harm us. Studies show we pay 10 times more attention to negative news than to positive news. And the corporate media knows it. Newspapers, cable news shows, websites and blogs have a 17-to-1 ratio of negative stories to positive ones. These stories are far more likely to be viewed and shared with others. And a larger viewership means more advertising dollars and bigger profits. As a result, the media does a bang-up job of keeping people anxious, angry and afraid. How does this help you assess risk and opportunity in the market? It doesn't. It's harmful, in fact. Yet human ingenuity, technological innovation and capital markets create enormous progress over time, lengthening our lives and improving our standard of living. Things are getting better for most people in most places in most ways. This doesn't mean, of course, that things are getting better for everyone everywhere in every way. That wouldn't be progress. That would be a miracle. Things are not getting better, for instance, for most men and women in Venezuela, Haiti and Afghanistan. But generally speaking, people around the world are living longer, safer, richer, freer lives than ever before. So follow the trendlines, not the headlines. If you recognize the many positives and keep your biases in check, your investment portfolio - not to mention your disposition - is bound to benefit. Good investing, Alex | 
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