The two big news items this week are the French election and US tax reform. There was also a big shakeup in the House of Mouse as Disney’s ESPN laid off a significant amount of on-air talent. What’s the best way to trade this news? If you read this blog with any regularity, you already know where this is going.
France’s establishment parties got the boot as nationalist Marine Le Pen and centrist Emmanuel Macron advanced through the first round of voting. This continues a global trend of shaking up the political status quo. As in other recent elections, volatility picked up before the election only to drop once the results were reported. While Le Pen is seen as a populist wild card, Macron is expected to win handily in the next round. Many expect Macron to add a stable presence to contrast President Trump’s boat-rocking.
The trade: No trade, but I will probably try to work in a global Macron pun in future posts.
US Tax Reform
White House officials revealed much-anticipated tax reform plans on Wednesday. The proposal includes reducing individuals from 7 to 3 tax brackets, a reduced one-time tax on repatriating funds held overseas, elimination of the estate tax, and other big changes. This may lead to companies such as Apple bringing cash hoards back to the US and putting that money to work. So how do we play this?
The trade: No trade, but I look forward to reading about which companies are supposed to benefit from this and then 12 months later reading about which companies really did benefit. I expect they will be two different lists.
House of Mouse
Disney is a juggernaut. Between Star Wars and ESPN, the company has a kung-fu grip on my house. ESPN’s viewership has been dropping recently, though. Whether this is due to cord-cutters (people cancelling cable in favor of streaming services like Netflix and Hulu), program formatting, or a perceived shift towards political evangelism, they are losing eyeballs. In response, they are cutting on-air talent. Will this stem the bleeding?
The trade: No trade. I’m confused as to why they’d drop Jay Crawford at a time when two Cleveland sports teams are peaking. They leaned on him heavily in 2016 and Clevelanders will miss seeing one of their own.
Bait and Switch
Yep, I promised three trades and failed to deliver. Not trading is often the right answer, though. Do I know enough about French politics to trade off of election results? Non. Do election results even have a rational effect on markets? No. I’ve found that successful investing is just as much, if not more, about not making mistakes as it is about picking winners. Getting the broad strokes of asset allocation right will do more for you than daytrading headlines. The more activity in your investment account, the more opportunity to screw up.
For being such a good sport, I present a gift. This video might make you actually want to watch the Star Wars prequels. Whether or not this is what George Lucas was going for, I am now a Jar Jar truther.