One thing we have learned through thirty-plus years on Wall Street is that one should never trade one’s politics. It can be very hazardous to one’s financial wellbeing. If one is wrong on the outcome of an election or legislation before congress, reactions can be swift. A clear example came yesterday, as President Trump tweeted that he had ordered his administration to stop negotiating with Speaker of the House Nancy Pelosi on a COVID-19 relief bill. Stocks turned from a very bullish session into a route to the downside within minutes. Key stocks in industry groups that were benefitting from the presumption of a bill passing were hit the hardest. For example, Industrial stock and airline maker Boeing (BA) had a large swing on the day from a high of 175.56 before President Trump’s tweet to a low of 159.33, a 9% intraday swing! Also, consumer related internet retail company eBay (EBAY) 26.62 – 4.08% was hit hard. Later, the president via additional tweets the following night, softened his tone on negotiations of certain items, facilitating a gap up opening Wednesday morning. On a trading psychology note, a dear friend with 60 years of NYSE experience, once shared one of his experiences that influenced his thinking. It was back in the early 1960s, he was doing duty in an order room on the floor during the Russian/Cuban missile crisis. At one-point rumors spread like wildfire across the floor that there had been an escalation (missiles flying). Sell orders came in heavy, knocking the market on its heels. Later after the close, he met with an old trader that was his mentor, at which point the old trader said to him “Never sell the end of the world. If you are wrong, you will lose on the trade, and if you are right, you won’t be able to settle the trade anyway!” Stay safe, stay nimble, and always use stop orders to protect capital.
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