I just finished a fascinating read.
It’s called The Big Cycle Of The United States And The Dollar, written by the famous investor and economist Ray Dalio.
If you have an hour or two to spare this weekend, I suggest you read it. It’s available for free on Ray’s LinkedIn profile.
While it’s an excellent research paper overall, one thing that stood out to me above all was the above quote.
Particularly because political swings from left to right are becoming ever greater, with policies more and more extreme.
And this can have a profound negative effect on your wealth.
Which raises a question, what’s the best way to protect your assets in this increasingly challenging political landscape.
The Rise Of Populism In America, And Why It’s Dangerous
To fully understand what’s going on, we must first look at how we got to this horrible situation.
Some form of political division is standard. After all, people can’t agree on everything.
However, getting to the extreme levels we see today is almost always connected with the growing wealth gap.
The last such period was the 1930s, which saw extremists take over as leaders in many of the world’s countries. These fell into two camps—the fascists, the populists of the right, and the communists, the populists of the left.
Now, before I scare you too much, let me just say that I don’t think America is approaching such extremes. The Democrats and the Republicans, however, are drifting in that direction when it comes to one area—government control.
You see, while fascists and communists differ in their view of the economy, with former supporting private enterprises and with the latter in favor of collectivism, they both believe that national interests are above that of an individual.
And because of this, they justify a robust government presence in the economy.
Again, I’m not saying the United States is run by fascists and communists. But we see increased government intervention in the economy under the pretense of national interest.
Whether you support such moves or not, I leave up to you. But as an economist, I can tell you that typically this has negative implications on one’s wealth.
It’s crucial you’re aware of this because both presidential candidates right now are looking for more government control of the economy.
Trump, with his tariffs and ultra-hawkish foreign policy, is influencing whole economic sectors, all to “protect” America’s dominance in the world. A classic nationalist move.
Biden, while focusing more on the domestic issues, is looking for increased regulation (another word for government intervention) and higher taxes on the rich. A classic socialist move.
And please, don’t be alarmed by the words “nationalist” and “socialist.” Neither is extreme enough to fit those descriptions.
However, as I’ve said before, they behave similarly in one critical aspect—they seek more government control of the economy.
How To Position Your Portfolio For The Next Presidential Term
So, the big question is—how does this affect your wealth?
In either case, I’m afraid the golden years are behind us.
Unless, of course, you’re investing in gold, in which case a more appropriate sentence would be “The golden years are upon us.”
I say this because in either event, a Biden or Trump presidency, precious metals should appreciate.
A Biden presidency is almost universally viewed as not-the-best for the economy. Mainly because his higher tax policy will dampen corporate profits. This is also why investors typically don’t like left-leaning politicians.
Since gold competes with other investments for capital, including stocks, declining prospects in those make precious metals more attractive.
Moreover, a Biden presidency would represent a significant shift in economic policy from Trump’s market-centric approach, creating uncertainty about the future. Again, this is the kind of environment that benefits gold.
On the other hand, in case Trump is re-elected, we know what to expect—more protectionist foreign policy.
And judging by the last four years, this means high market volatility, global political uncertainty, and more trade disputes. All of which benefits gold.
If you’re looking to add gold to your portfolio, here are three ways to do it without needing a storage facility.
Overall, the most important thing to focus on for the next four years is diversification.
Diversify across industries instead of focusing only on the hottest tech stocks.
Diversify across asset classes by investing in precious metals, stocks, and real estate.
And diversify across countries. Buying real estate around the world is now easier than ever.