It is not very easy for someone to make portfolio diversification on the back of political changes. But there are who do and are extremely lucky and successful. In some situations it is disappointing that such things still happen in a democratic country. I’d heard of a portfolio manager who divested from all his investments when the current Indian government came to power and invested in all Adani Group related stocks. He is still laughing all the way to the bank. No big analysis of dividend discount model, forward P/E, cash flow - nothing of that sort! Good intuition, political connections and some inside information.
There are also some investments that you can make if a particular political party is coming to power based on what their pet projects would be. One could have made a calculated guess on how the energy companies would have done under a Democratic government. The Democrats have a global agenda on clean energy.
Another move will be the prospects of a digital dollar. It seems clear that global governments will not allow non-sovereign forms of money to flourish. It was only two weeks back the Senate Banking committee had a hearing on the digital dollar. It was not only a public exploration and introduction to the concept of a central bank backed digital currency but a move to thwart the progression of private cryptocurrency market (Bitcoin and stablecoins).
The US Justice Department announced a few weeks ago that it recovered $2.3 mio in cryptocurrency of the ransom collected from the colonial pipeline hack. A few days back it was reported that South Korea seized almost $50 mio of crypto assets from citizens accused of tax evasion. The discussions of a digital currency regime have been underway at almost 90% of the Central banks around the world, according to the BIS report.
Actually, the Democrats tried to push through a grand plan for a Central bank backed digital dollar last year, as part of the Covid relief bill. It was blocked by Trump and his team members but now with a fully aligned Congress and White House, one can safely assume the Central Bank digital currency is coming much faster.
There could be two major outcomes under the present US President’s regime. Firstly a move to a cashless society is much faster than we all think. Secondly, a move to regulate all crypto currencies is already in the works. So position yourself to benefit from this.
Abraham George is a seasoned investment manager with more than 40 years of experience in trading & investment and portfolio management spanning diverse environments like banks (HSBC, ADCB), sovereign wealth fund (ADIA), a royal family office and a hedge fund.