Will the election result matter to the stock market?
We are about thirteen weeks away from the Election of 2020….as if the year has not been strange enough. Now this.
It is possible the result of the Presidential election, which party is in office, may have little to no affect the stock market? (1) See the Jeremy Siegal quote at the end. (2)
Some people may feel the market may crash if a Republican is elected President, while others may feel the stock market may crash if a Democrat is elected President. Two different outcomes for the same event yet the same concern. Both are looking to avoid a situation (stock market crash /decline) that may or may not occur under two different election results. If the election is causing you concerns, please call and talk with me. Making investment decisions based upon the potential of future events that may or may not occur could possibly not be a good idea and very wrong in several ways (1):
So, if the stock market does go down after the election, how far down? For how long? For what reason? What will cause the recovery?
If the stock market does go down, how far down until you perceive that it is the perfect time to start investing?
Do you wait until “things” just seem like they cannot get worse?
Do you wait until “things are getting better” to start to invest?
If the stock does not collapse / go down, will it go up immediately? By how much? And if you got out before the election, when will you re-invest? Immediately? Or wait for the next crash to invest? And then how long will you wait for that crash?
Do you know how the stock market has performed following previous elections? Or which administrations have had best stock market performance during their term in office? Democrats or Republicans?
If you want to have some fun, next time a friend, neighbor, golfing buddy, relative or random stranger / talk show host / internet guru, starts to speak loudly with great confidence about the impact the election will have on the November 2020 election, ask them the previous questions. And make them be specific.
Most people may have no profound, rational, fact-based, historical reason for making their stock market projection following one or another specific election result. They are really expressing an emotional response to an election result they think will become “the undoing of our nation.”
For fun, which two presidents (going back to Truman) did the stock market do the best during their term? How about the worst returns (clue here, terrible timing will help identify one and the other told us he was not a crook)? Answers in a minute.
Forbes Magazine’s, Daily Cover, July 23, 2020 presents some great discussion details. It is often thought is that Republicans are fiscally conservative, will reduce spending, reduce debt, and reduce taxes while Democrats are free-spending, tax increasing, budget-busting and debt increasing. However, the Forbes article as well as two articles regarding deficit spending and budgets by President provides facts that counter these beliefs. (2, 3, & 4)
Every politician wants to be the hero. They have an unquenchable desire to be liked and get re-elected. This is all done by “kissing-up” to the people with real power (those who write the checks for election financing) and secondarily to the people who should have the real power, the voters. Very few elected officials have the courage to do what may be the unpopular or right thing for our country and all the people who live here. (1)
We are talking hard choices. Long-term fiscal responsibility versus immediate gratification. Not caving to special interests. Sometimes disagreeing with your party because they may be wrong. Not everyone in your party is right all the time, nor is the other guy / gal wrong all the time. Realize that Party affiliation is just a label. Do you like being labeled or “pigeon holed” because of your appearance, the car you drive, wearing a mask or no mask, gender, city or state of residence? Is everyone with your label the same?
As a suggestion, I am proposing giving up the labels in politics. Talk about your proposals / solutions. If you don’t like what the other guys are doing or proposing, don’t tear it up until you have something better to put in its place.
So, are Democrats or Republican presidents better for the stock market? According to the Forbes article, we have had thirteen presidents since 1945 (Truman). Democratic presidents averaged a 10.6% per year return on the S&P500 while the Republicans averaged 4.8% per year. (2)
During which two presidents, did the market go up the most? Bill Clinton 210% and Barack Obama 182%. The worst two: George W. Bush -40% and Richard Nixon -20%. There are many circumstances surrounding these numbers that deserve discussion another time. For now, just use the info confidently during your next ZOOM-cocktail hour. (2)
According to Jeremy Siegel, author of the 1994 investment classic Stocks For The Long Run, Wall Street’s obsession with politics is mostly misplaced: “Bull markets and bear markets come and go, and it’s more to do with business cycles than presidents.” (2)
Do you have a plan for your investments? If you do, then follow the plan and don’t get distracted by election cycles, viruses, political discussions, etc. If you don’t have a plan, no better time to start than now. Call or email with questions.
Entertainment options:
Jeopardy.. From the Vault. Airs until August 13th… Best of Jeopardy since the first year in 1984.
The Old Guard… Netflix … Starring Charlize Theron
Alone … History Channel and Netflix… Ten survival “experts” attempt to survive alone in harsh wilderness conditions in Canada, Mongolia, Patagonia Argentina.
Approval number: CN1275586_0721
