Is There an Election Play to Be Made in Metals?
In this Market Foolery segment, Motley Fool analysts Mark Reeth and Jason Moser open up their mailbag to tackle a listener question with an answer that spans politics, macroeconomics, interest rates, and metals prices. As it turns out, none of those things matter to your portfolio as much as you may think.
A full transcript follows the video.
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This podcast was recorded on Oct. 13, 2016
Mark Reeth:Let's go ahead and poll our listeners. For those of you who didn't join us on Facebook, we are live on Facebook right now. Folks out there have been listening, have been watching, and have been writing some questions in the comments section of the video. I've got two questions for you.
Jason Moser: Be gentle.
Reeth: I'm going to try. The first question, I think I know the answer to. I'm going to take a shot at it before I leave it to you. Robert B. asks, "If Hillary Clinton wins, do you think a metals play up is in the cards? It seems like interest rates would go up." Now, this seems like the time to mention that while macro events like elections and the Fed and all of those things, you always hear about all the news headlines are important in a general sense. We try not to make too much of them here at the Fool. We focus on fundamentals. We focus on good companies, good businesses with long-term prospects, not so much about what's going to happen if Hillary wins, what's going to happen if Trump wins? What's going to happen if the Fed increases/decreases rates 2.5%? Where's the dollar? Where is oil? Again, that stuff can be important, but it's just not that important to us. What's your take on it?
Moser: Yeah, I think you hit the nail on the head there. It's stuff that matters, but I think it's stuff that matters on a quarter to quarter basis. It's what makes financial news. Without that stuff, there would really be no financial news and we probably wouldn't even be doing this, to a degree. I would say two things. Number one, regardless of the situation, I think that metals ... I would never favor making metals any type of a heavily weighted holding in my portfolio. I think that metals are OK if you're looking for something to maybe protect against inflation, but again, you sort of look at metals, gold in particular, you think, what's the real value there other than just existing and being what it is?
I think that no matter who wins the election, we're in a situation where monetary policy has to tighten here at some point. Rates have to go up because really they can't go any lower. I mean, they could, but it would be total chaos at that point. I think that no matter who wins, interest rates are going up. It's a matter of when, not if. From there, yeah I think that we probably see a little bit of a different perspective on the stock market. I think the stock market has benefited quite nicely from a low interest rate environment, just basically because there's nowhere else to get that kind of return. I mean, you're not going to find it in housing. You're not going to really find it in the bond market anywhere. You're not going to find it in metals. The stock market has really benefited a lot from this.
Back to your point, talking about the fundamentals of business, the stock market as benefited nicely, but it also benefits from the fact that it's made up of a lot of really good, solid businesses. Those businesses are going to continue to open their doors and do a lot of business in the face of whoever the president is and what the interest rate policy is. That's why we invest the way we invest. We talk about these businesses like Amazon andStarbucksandAlphabetandFacebook. Those are all businesses that are going great, whatever the monetary policy and macro picture is. Like you said, we don't really base our investment decisions on who's going to be the next president.
Reeth: Terrible question, Robert. No, I'm just kidding.
Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors.Jason Moser owns shares of Starbucks. Mark Reeth has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Amazon.com, Facebook, and Starbucks. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.