Democrats and Republicans despise each other; they won’t be singing kumbaya anytime soon. Political dysfunction in Washington is a headwind for investors that’s likely to persist for at least another two years. Get used to it.

President Biden’s State of the Union address on Tuesday, in which he emphasized favorable economic trends, was well-received by the American public. More than 7 in 10 viewers of Biden’s address expressed a positive reaction, according to a CNN poll.

That said, Biden’s overall approval rating hovers at a low 42%. In a recent AP-NORC survey, 75% of Americans described the economy as “poor,” with only 25% saying it was “good.”

In reality, the U.S. economy is showing resilience and inflation is falling. But the two political parties continue to occupy starkly separate realities, setting up a bitter fight over the debt ceiling.

The partisan bickering threatens financial stability. Below, I steer you toward investment opportunities that transcend these headline risks.

Momentum falters…

The main U.S. stock market indices rose in early trading Thursday, but then reversed course as investors fretted anew about the Federal Reserve’s intentions. The indices closed sharply lower as follows:

• DJIA: -0.73%
• S&P 500: -0.88%
• NASDAQ: -1.02%
• Russell 2000: -1.40%

Treasury yields rose and the Dow turned negative for the week. The handwringing over rates counterbalanced some good news lately on fourth-quarter corporate operating results, such as Walt Disney’s (NYSE: DIS) beat Wednesday on both the top and bottom lines. But the worry now is that the momentum factor has bottomed.

After the closing bell Thursday, I asked my colleague Dr. Joe Duarte, chief investment strategist of Profit Catalyst Alert and Weekly Cash Machine, what he thought of the day’s market action. He responded:

“This is that time in a rally when the action gets a bit tricky. From a market mechanics standpoint, the stock market has come a long way since the October 2022 bottom. It’s normal for a price consolidation to develop after a huge rally. The danger is that the majority of traders miss that point and panic whenever bouts of profit taking hit the market.

“As a result, it’s prudent to keep an eye on key chart points such as the 4050 area for the S&P 500 (SPX), and the 20-day moving average for the New York Stock Exchange Advance Decline line (NYAD). It’s also important to remember that mechanical traders (algos) will accentuate the prevailing trend, which means that if the sellers do take charge, things could go south in a hurry.”

Read This Story: As The Powell Turns

Aside from fiscal showdowns, investors in the coming days will remain focused on monetary policy, job market trends, and Q4 earnings reports.

Interest rates hover near a one-month high, with the 10-year Treasury yield hitting about 3.66%. Rates are still well below last year’s high, with the 10-year yield in October breaching 4.2%. The dip in rates since then indicates easing inflation pressures combined with economic worries.

We got some mixed news this week on the inflation front. The January reading of the Manheim Used Vehicle Value Index (MUVVI) showed that wholesale used-vehicle prices rose 2.5% in January compared to December, the first month-over-month increase in nine months. The MUVVI climbed to 224.8 (see chart).

The likely explanation for the jump in wholesale prices is that wage growth and persistent strength in the jobs market renewed demand for used vehicles, while at the same time lingering supply chain disruptions and shortages are still manifested in prices.

More importantly, though, the MUVVI is still down 12.8% from a year ago, an auspicious longer-term development in the fight against inflation. The jump in used-vehicle prices in 2022 was a major contribution to the surge in the consumer price index (CPI).

Due to rising interest rates, demand for vehicle loans is falling, which should further dampen vehicle prices and hence overall headline inflation this year.

The public perception is that the economy is going to hell in a handbasket, but that’s simply not true. As Founding Father John Adams once wrote: “Facts are stubborn things.”

Editor’s Note: Looking for growth stocks that are resistant to the pressures described above? My colleague Jim Pearce, chief investment strategist of our flagship publication Personal Finance, has pinpointed hugely profitable opportunities in the marijuana industry.

That’s right…marijuana. As it becomes increasingly legal, pot has transitioned from rebellious act to mainstream investment.

Demand for weed is booming around the world, but a lot of pot stocks will never turn a profit, leaving their shareholders holding the, um, bag.

However, Jim has found three pot plays that stand to profit regardless of marijuana’s ups and downs, because they provide the industry with an essential service. To learn more, click here.

John Persinos is the editorial director of Investing Daily.

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