Barry Ritholtz Warns: Don't Mix Investing and Identity Politics

Identity politics and investing don’t mix well, investor Barry Ritholtz warned this week, urging investors not to base their portfolio moves on emotional ideological branding.

“Good investing is about future discounted cash flows, behavioral management and having a long-term perspective. It’s not about partisan politics, religious beliefs or any other emotionally driven system separated from the intelligent allocation of capital,” the Ritholtz Wealth Management founder and chief investment officer wrote Tuesday on his blog, The Big Picture.

“You might not know that, given all of the new ETFs that are aimed at your emotional hot buttons,” he wrote. “Marketing to fear and greed/? That’s so very 1990s. Tribalism, identity politics and ideology are how today’s savvy marketers reach into investors’ wallets.”

Playing off the YALL ticker symbol for the new God Bless America ETF that launched this week to counter corporate environmental, social and governance policies identified with liberal activism, Ritholtz titled his post: “Y’all Should Stop Making Emotional Bets.”

“When investors allowed their personal beliefs about faith or politics to influence their capital allocations in the past, it has not worked out particularly well,” he wrote, citing several examples, including times when partisans opined incorrectly that Barack Obama’s “radicalism” was “killing the Dow” and that Donald Trump’s election would cause the market to tank.

Ritholtz, who has banged this drum several times, also linked to an earlier post in which he cited the selloff in Nike shares after the athletic apparel company created an ad featuring quarterback Colin Kaepernick, who’d drawn support and condemnation for taking a knee during the national anthem to protest racism.

The consensus trade, shaped by “white, old, conservative, rich, American pundits,” who were out of touch with Nike’s audience, was that “wokeness” doesn’t sell, he wrote in the 2019 column, first published on Bloomberg. The year after Nike made the Kaepernick ad, though, the company’s stock was outperforming the S&P 500, he noted.

“I have no problem having your portfolio reflect an investor’s values and beliefs. This is true whether you invest via Sharia law, avoid Vice stocks, support diverse boards, or embrace sustainable investing,” Ritholtz wrote in this week’s column.

“It should be a rational approach, one that is more of a tilt towards what you believe in, or away from what you don’t, and UNLIKELY TO IMPACT YOUR PORTFOLIO NEGATIVELY. Any of these thematic investments that move your holdings too far away from the benchmark index is likely to lag over the long haul,” he wrote.

“This is why I find emotional-based ETF ideas to be a poor basis for stock selection.”

(Photo: Bloomberg)