This Election is Really Important… Just Not to Your Portfolio

Close up of Hands marking November 3 election day on Calendar as reminder for voting - Concept of reminder for US election

This Election is Really Important… Just Not to Your Portfolio

 Neal Price, Principal

October 23, 2020

The news is everywhere.  It’s inescapable.  The news cycle is both unending and forever changing.  There is a dizzying array of data and opinion on all sorts of topics.  The sheer number of critically important issues is staggering.

Of course, the issue that is arguably (and rightly) getting the most attention right now is the upcoming election.  In less than two weeks our nation will choose our President, one-third of our Senators, the entire House of Representatives, and countless state and local office-holders. This election has been called the most consequential election in modern history.  Of course, we’ve all heard that before, but this time it may really be true.

To be sure, there’s a lot at stake – how our nation manages its way out of the pandemic from both a public health and economic perspective, the future of the Supreme Court, what changes may (or may not) be needed on environmental issues, how we repair the torn fabric of our society, indeed who we are as a nation.

With such weighty issues on the table, it may seem trite to write a piece about how the markets will fare post-election.  But my job is to counsel our clients on their wealth, so here I am.  I have my own thoughts on the weighty issues of today’s world, of course, but that’s not my role here.

Ok, so just how will the markets fare after November 3?  We get that question daily.  I’ve got lots of credentials, 30+ years of market experience, and have worked with hundreds of clients helping them achieve their financial goals and protect their wealth.  I’ve also been through seven presidential election cycles during my career as a financial planner, and a similar number of mid-term elections where Congress has changed hands repeatedly.

With all that training and experience, here’s my answer:

I don’t know.

But what I do know is this:

It. Does. Not. Matter.

Really, it doesn’t.  I’m not trying to minimize the importance of the election.  But who wins the election, which party controls each house of Congress, even the policies themselves, won’t determine if you and your family are able to achieve your long-term financial goals.  That assumes, of course, that you have a prudent plan in place.  More on that in a bit.

There is no shortage of data that shows that, historically, the market does not perform statistically better or worse under one political party or another.  Take a look at my partner Dave Copeland’s post on this topic from a few weeks ago.  It’s pretty amazing – there’s no pattern to be found in the various combinations of political parties holding the White House and each house of Congress.

But that doesn’t stop folks from thinking they have the answers.  Earlier this week I woke up to an email with this subject line: “10 white papers about the election’s effect on the markets.”  Not blog posts… full-blown white papers!  Not one or two… ten!  All with attention-grabbing titles like, “…Volatility worries rise around election time,” or “What about bonds under Biden?” or “What the 2020 elections mean for the markets-and what they don’t.”

Here’s the truth: the President has little direct, near-term impact on policy or the economy, and certainly even less impact on the financial markets.  The same is true for Congress.  Of course, markets react to the news of the day, sometimes gyrating wildly.  But if you’re a thoughtful investor and not a trader, those daily swings are irrelevant.  Even a bear market that goes on for months shouldn’t sway your well-established financial plan.

The reality is that through good times and bad, recession and expansion, war and peace, high interest rates and low…. over time the financial markets function well, and yes, the stock market goes up.  The key phrase here is over time.  I am in no way predicting which way the stock market will go after the election.  It’s quite possible we’ll be in for a lot of volatility in the days and weeks immediately following.  It could be painful.

Or maybe not.  I don’t know.  And neither does anyone else.  Even the most plausible prediction of what’s to come doesn’t mean that the markets will behave as expected.  Markets have a way of making humans look foolish time and again.

So that brings me back to having a plan.  It’s what we do for our clients – create a sound financial and investment plan that stands the test of time.  Any money that’s invested in “risky assets” (i.e., stocks) is designed for long-term growth.  Not for a few months from now or even a year or two.  Long-term means at least several years.

What happens in the interim is just background noise and we need to tune it out.  My partner Tom Buhrmann posted this piece just last week encouraging investors to focus on that small subset of things that matter and that can be controlled.

All that noise is just a distraction.  Don’t fall for it.

Regardless of what the next days, weeks, and months bring, my amazing colleagues and I are here to guide you, to look out for your well-being, making sure to be your partner and keep you on the right path toward your financial future.

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