There is a wealth shift that nobody is talking about

Although the average investor doesn’t view markets in this way, for every transaction, there is a winner and a loser; we refer to this as a zero-sum game. This is because once a financial transaction is complete, the instrument traded either increases or decreases in value, leaving one party better off and the other worse off. Warren Buffett famously stated, “The stock market is a device to transfer money from the impatient to the patient.” This is, and always will be, a true statement.

Although the average investor doesn’t view markets in this way, for every transaction, there is a winner and a loser; we refer to this as a zero-sum game. This is because once a financial transaction is complete, the instrument traded either increases or decreases in value, leaving one party better off and the other worse off. Warren Buffett famously stated, “The stock market is a device to transfer money from the impatient to the patient.” This is, and always will be, a true statement.

In recent years, we have become aware of other types of wealth shifts generated by financial markets. For instance, the pandemic triggered a massive wealth shift from small businesses to large corporations due to policies that forced mom-and-pop restaurants, retail stores, gyms, etc., to shut down, while Costco, Walmart, McDonald’s, and the like, were allowed to continue operating. Furthermore, web-based businesses, most of which are represented by publicly traded stocks, grew rapidly, giving rise to the Magnificent Seven. If you are wondering, this is a significant part of the reason the stock market, which represents large corporations but excludes small businesses, experienced a surge after 2020. Of course, government subsidies and liquidity injections added fuel to the fire, but an unprecedented shift in wealth from Main Street to Wall Street was a primary driver of the phenomenon.

There is considerable discussion about the current administration’s intention to reverse the pandemic-induced shift in wealth. They believe they can achieve this through deregulation, lower interest rates, and programs to encourage small business loans. The jury is out on whether they can even make a dent in the wealth gap, but I think we can all agree that having more balanced enterprise prosperity would lead to a healthier economy and society.

However, there is another wealth shift yoyo that everyone can see with their own eyes, but nobody is willing to say out loud. I first noticed this in 2008/2009, the US had a new President with what were perceived to be anti-business policies amid what was coined the Great Recession. Yet, despite widespread pessimism expressed on Wall Street and in the portfolios of many across the land, it was a generational buying opportunity.

In the current politically charged environment, bringing attention to this matter is not only painful but perhaps career suicide (please don’t cancel me). I noticed it during Trump 1.0, and it is even more obvious thus far in Trump 2.0.  There is an unwritten rule in finance against making money decisions based on political opinions. Yet, there are large swaths of the population that have succumbed to doing just that. Regardless of the side of the political fence you see yourself on, this is not a healthy or profitable investment strategy.

Imagine liquidating your portfolio in March of 2020, or selling futures and buying put options, because you didn’t trust how the government would handle the pandemic. It is conceivable that such a quick decision could ruin someone’s retirement years. I knew one trader who aggressively sold and held S&P 500 futures during Trump 1.0, waiting for an “impeachment crash” that never materialized. Instead, the market put together the largest rally in history. This was a trader who was experienced and turned a small amount of money into several million during the financial crisis; even the most seasoned traders are vulnerable to their political bias.

On the other hand, those who bought risk assets aggressively late last year were convinced that the change in government would be beneficial for the economy and the equity market. Depending on what was bought (futures, leveraged ETFs, etc.), it is conceivable that such “investors” or traders didn’t survive the April blip. And I think we all know someone who liquidated their life savings portfolio (likely overallocated to stocks relative to their age) in April of 2025.

More recently, I’ve spoken to individuals who believed the oil market would soar to triple digits due to the actions of our leaders in DC and the Middle East. While this might eventually happen, those traders likely wiped out their accounts or at least their conviction on the $12 per barrel 2-day decline early this week. Lastly, the gold market has been boosted by tariff chaos, political uncertainty, and war, but that doesn’t mean these gains hold. Our analysis suggests that a gut-wrenching correction in precious metals is forthcoming, one that few are expecting.

There is no place for political opinions in the financial markets. Regardless of how you feel about what is going on in DC, betting against America has been a losing strategy. But chasing euphoric rallies for political reasons is just as foolish. Contrary to human nature, financial decisions, specifically investment or trading, must be made based on risk and reward probabilities, and nothing else.

With that said, according to our chart analysis, the S&P faces significant resistance near 6,500, just 250 points away. If this trendline is rejected, as is likely to happen in late summer—a treacherous time for stocks—the potential downside risk is considerable. The first support comes in near 5,500, 1,000 points lower! If risk/reward is our guide, this is not the time to be aggressively long equities.  A 250-point profit potential versus a $ 1,000 risk is not attractive. Lastly, during Trump's previous term in office, the stock market performed relatively well; however, the volatile nature of his leadership occasionally impacted the market, leading to outsized corrections.

Those focused on risk/reward might avoid the painful hardships those selling stocks out of spite for the President, or buying stocks because they believe Trump is the magic bullet, are sure to endure.