Politics can change the pace of long-term business trends without reversing their direction, Roundhill’s strategist said after the U.S. election, arguing that election trading distracts investors from companies’ underlying performance.
The distinction puts the focus on whether a business benefits from lasting changes in demand, rather than which party wins office. Political decisions can affect how quickly those changes unfold.
“Politics doesn’t really upend the direction of that trend,” the strategist said on Yahoo Finance’s Market Hang, published Nov. 4. “They might slightly change the slope.”
The strategist described having worked as an analyst and strategist before joining the company, with experience of investment meetings dominated by political developments. That experience informed a preference for examining businesses over longer periods.
“I personally have never made any money trading politics,” the strategist said. Paying too much attention to short-term political developments risked obscuring the factors that drive corporate earnings.
The discussion also challenged the use of past election results to predict stock returns. Bloomberg Intelligence research cited during the conversation put average S&P returns at about 7.5% in the three months after midterm elections.
Small samples leave open whether elections explain those gains. A broader rise in U.S. stocks over long periods can also affect comparisons that measure returns around recurring political events.
Artificial intelligence and data center construction became the main example of how policy might change the pace of investment. Restrictions on new projects could slow building while leaving demand for computing capacity in place.
The discussion left unresolved whether restrictions would persist, face opposition or change as state and local governments negotiated with developers. The distinction was between stopping construction and setting conditions on where it proceeds.
State governments’ interest in tax revenue formed part of that argument. Limits on development were seen as potentially giving governors more room to seek concessions from companies seeking to build facilities.
A separate question concerned technology itself. More efficient ways to develop artificial intelligence could alter the need for data centers, making that a different challenge from political limits on construction.
The conversation also considered whether slower building could benefit large technology companies that already own computing infrastructure. Such companies could retain an advantage over businesses still trying to obtain that capacity.
Another distinction concerned capital spending and cash generation. Slower growth in spending could improve the cash left after investment without requiring companies to cut spending outright.
The remarks offered no timetable for resolving construction restrictions and no firm conclusion about their eventual scope. The central argument depended on demand for computing continuing despite changes in the speed of development.
