Staying Calm When Markets and Politics Collide

Boy, you should see my inbox. In the past month I have received emails from readers accusing me of being everything from a fascist to a communist — all based on the same content. It's as entertaining as it is perplexing, and I appreciate every ounce of the discord.

Just for the record, I am not a fascist, nor a communist. I am an investor, and am charged with what I believe is the most solemn professional duty: investing other people's money using the unwavering standard of providing this service and advice driven solely by their best interest. I work in a serious business, and I deeply appreciate the obligation vested in me by the people I serve.

Unfortunately, after what I perceive was about 1998, it has become impossible to be an investor anywhere in the world without also being in tune with the activity of the U.S. Federal government. Government policy in the form of interest rates, borrowing, regulation, and taxation have come to dominate the focus of investors as the size of government has grown over time. With Federal outlays in 2026 expected to be in the $7.5 trillion range, the government now represents about 23% of all economic activity in our $31 trillion economy. I have suspended the illusion that one political party or politician is going to mitigate this reality — ignoring the impact of this leviathan from an investment perspective is simply folly.

So, let me get it out there. The war in Iran concerns me from an observational American perspective. Iran is a large nation of 93 million people. Its land mass is roughly four times the size of California. It is a big country with an established and functional bureaucracy and professional military. It is not a failed state. I pray for a fast resolution but worry this may not be possible. In this type of situation, when the myopic is dominating my focus, the best approach is to step back and attempt to muster a more historically broader lens — or risk making reactive decisions which could prove unproductive over time.

When we take a breath, it helps to look at historical trends. According to analysis from LPL Financial, major events — from Pearl Harbor to more modern conflicts — tend to cause heightened volatility with daily declines of roughly 1% in the S&P 500, and the index during previous crises has experienced aggregate 5% to 10% pullbacks. The same analysis also indicates, however, that one year later the index on average was up about 15%.

If you've been reading the column, you know I am not a "set it and forget it" investor. I believe dynamic risk management is warranted in some market environments, and I try to be opportunistic when markets provide the chance. My own personal experience has taught me these types of events tend to cause an initial disruption or shock. I've tended to just sit tight during this stage as markets move too fast to really formulate decisions.

I have used this initial shock period to observe and assemble a strategy, typically in the form of a buy list on stocks or sectors I feel like I want more exposure to, or may have missed in the market cycle prior to the crisis. I formulate pricing tactics and then wait — if I get my price I buy, and if I don't, that's OK too. Finally, after the markets have adjusted to the new normal, portfolios can be rebalanced — not necessarily changing aggregate exposure to stocks in general, but rather how the exposure is built for the post-crisis world.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. Stock investing includes risks, including fluctuating prices and loss of principal. No investment strategy can guarantee a profit or preserve against loss. Past performance is not a guarantee of future results.

Marc Ruiz is a wealth advisor and partner with Oak Partners and registered representative of LPL Financial. Contact Marc at marc.ruiz@oakpartners.com. Securities offered through LPL Financial, member FINRA/SIPC.