Investing Should Be Apolitical: A Portfolio Management Perspective

Investing is a game of numbers, logic, and patience. It’s about understanding businesses, assessing their potential, and making calculated decisions to grow your wealth over time. Yet, too often, I see investors letting their political beliefs cloud their judgment, swaying their decisions in ways that can lead to missed opportunities or costly mistakes. Whether you lean towards democracy, socialism, or any other ideology, investing should remain apolitical. It’s about seeing the world as it is, not as you wish it to be. In this piece, I’ll dive into why separating your political views from your investment decisions is crucial, how policies—whether from communist or democratic systems—can create opportunities in the market, and why a long-term, fundamentals-focused approach always wins. Let’s get started.

The Political Noise and Market Reactions

Politics has a way of stirring emotions. Whether it’s a fiery speech from a world leader or a sudden policy shift, the markets often react with volatility. Take China’s crackdown on its tech and education sectors in 2020 and 2021, for example. The Chinese Communist Party (CCP) rolled out sweeping regulations, targeting giants like Alibaba, Tencent, and even the private tutoring industry. Stocks plummeted as investors panicked, fearing the end of growth for these companies. The knee-jerk reaction was to sell, with many assuming the CCP’s “draconian” measures would choke these businesses forever.

But let’s flip the coin. Across the Pacific, Donald Trump’s tariff wars during his presidency sent shockwaves through global markets. His trade policies, aimed at protecting American interests, rattled supply chains and sparked uncertainty. From 2018 to 2020, markets swung wildly as investors tried to predict the fallout of tariffs on everything from Chinese goods to European cars. US indices, including the S&P 500, saw sharp dips during key moments of the trade war, only to recover as cooler heads prevailed.

Both examples—China’s regulatory hammer and Trump’s tariff saga—show how political decisions, whether from a communist or democratic system, can create turbulence. But here’s the thing: markets don’t care about your political leanings. They don’t care whether you cheer for democracy or admire the efficiency of a centrally planned system. What matters is how businesses adapt, survive, and thrive amidst these changes. As investors, our job is to cut through the noise and focus on what drives long-term value.

Fundamentals Over Feelings

I’ve always believed that investing is about discipline, not emotion. When you let your political beliefs dictate your portfolio, you’re letting feelings take the wheel. That’s a recipe for disaster. Instead, focus on a company’s fundamentals: its revenue growth, profit margins, cash flow, and competitive edge. These are the things that matter over the long haul.

Let’s go back to China’s tech crackdown. When the CCP tightened regulations on companies like Alibaba, many investors saw it as a death knell. Share prices tanked, and the narrative was that Beijing was out to destroy its own tech giants. But if you looked at Alibaba’s fundamentals—its dominant position in e-commerce, its growing cloud business, and its ability to generate cash—you’d see a company that was temporarily mispriced, not doomed. Fast forward a couple of years, and Alibaba’s stock has shown signs of recovery as the market realized the company wasn’t going anywhere.

The same logic applies in democratic markets. During Trump’s tariff wars, companies like Apple and Nike faced headwinds due to their reliance on Chinese manufacturing. Share prices dipped as investors fretted over rising costs and disrupted supply chains. But these are companies with strong fundamentals—global brands, loyal customer bases, and robust cash flows. Those who sold in a panic missed out when these stocks rebounded as companies adapted by diversifying their supply chains or passing costs to consumers.

The lesson? Political policies, whether from Beijing or Washington, can cause temporary mispricing in the market. But mispricing is an opportunity, not a calamity. If you believe in a company’s long-term potential, short-term political noise shouldn’t shake you out of your position.

The Long Game: Reversion to the Mean

One of the most powerful concepts in investing is the idea of “reversion to the mean.” Markets are emotional in the short term, but over time, they tend to reflect the true value of a business. When political events—like a trade war or a regulatory crackdown—cause share prices to plummet, they often overshoot, creating bargains for patient investors.

Take Tencent, another victim of China’s 2021 regulatory storm. The company’s stock price was hammered as investors feared gaming restrictions and broader tech regulations would cripple its growth. But Tencent’s fundamentals remained rock-solid: a dominant position in gaming, a thriving WeChat ecosystem, and growing investments in cloud and fintech. Those who bought during the dip, betting on the company’s long-term prospects, have been rewarded as the stock began to recover when the market realized the panic was overblown.

The same principle applies in Western markets. When Trump’s tariffs hit, companies like Caterpillar, heavily exposed to global trade, saw their shares take a beating. But Caterpillar’s fundamentals—its leadership in construction equipment, its global reach, and its ability to generate cash—didn’t vanish overnight. Patient investors who held or bought during the dip saw the stock rebound as the market corrected its overreaction.

The key is to think long-term. Political events are fleeting; strong businesses endure. As Deng Xiaoping famously said, “Regardless of whether it is a black cat or a white cat, as long as it catches mice, it is a good cat.” In investing, it doesn’t matter whether the “cat” is a company operating under a communist regime or a democratic one. If it’s a good business with strong fundamentals, it’s worth considering.

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Avoiding Knee-Jerk Reactions

One of the biggest dangers of mixing politics with investing is the temptation to make knee-jerk decisions. When an election swings one way or another, or when a government announces a bold new policy, it’s easy to let emotions take over. You might feel compelled to sell everything if a candidate you dislike wins or double down on a sector because you align with a government’s ideology. Both are mistakes.

Let’s say a new administration comes to power in the US, promising to raise corporate taxes. The market might dip as investors worry about shrinking profit margins. But selling your entire portfolio because you disagree with the policy ignores the fact that good companies find ways to adapt. They cut costs, innovate, or pass price increases to consumers. Similarly, if a government you admire pushes a policy you think is brilliant, piling into related stocks without doing your homework is just as risky.

Separating your political views from your investments helps you avoid these traps. It forces you to focus on data—balance sheets, cash flow statements, growth projections—rather than headlines or campaign promises. It’s about staying rational when the world around you is anything but.

Embracing Diverse Perspectives

Here in Singapore, we’re lucky to live in a melting pot of ideas. Our city-state is a hub for global finance, drawing investors from all walks of life. That diversity is a strength. When it comes to investing, I’ve learned that holding different perspectives—without letting them cloud your judgment—can give you an edge.

For example, some investors shy away from Chinese stocks because they disagree with the CCP’s policies. Others avoid American companies because they’re skeptical of Western capitalism. Both are letting ideology limit their opportunities. A good investor looks at the world objectively, seeking value wherever it exists. A company in Shanghai can be just as compelling as one in Silicon Valley if the numbers stack up.

By keeping an open mind, you can spot opportunities others miss. When China’s tech stocks crashed in 2021, many Western investors wrote them off entirely. But those who dug into the fundamentals saw companies trading at bargain prices. Similarly, when US markets wobbled during the trade war, savvy investors scooped up shares of strong companies at a discount. The ability to set aside political biases and focus on value is what separates great investors from the pack.

Final Thoughts: Stay Calm, Stay Focused

Investing is a marathon, not a sprint. Political events, whether they’re elections, trade wars, or regulatory crackdowns, are just bumps in the road. They might cause short-term volatility, but they don’t change the fact that good businesses with strong fundamentals will find a way to succeed. As investors, our job is to stay calm, focus on the numbers, and tune out the noise.

Here in Singapore, we’re used to navigating a complex world. Our tiny island thrives by staying pragmatic, looking for opportunities no matter where they are. That’s the mindset we should bring to investing. Whether it’s a company in a communist country or a democratic one, what matters is its ability to generate value over time. As Deng Xiaoping’s cat analogy reminds us, it’s not about the colour of the cat—or the politics of the market—it’s about whether it can catch mice.

So, the next time you’re tempted to let your political beliefs steer your investments, take a step back. Look at the fundamentals. Be patient. And remember: the market doesn’t care about your politics, and neither should your portfolio.

Cheers! Till next update 😄

STE