With election season being upon us, I thought it would be worthwhile to share my thoughts on using your political lens for investment purposes. In a word – DON’T!
Oppenheimer Funds (now a part of Invesco Funds) published a presentation for financial advisers entitled "Compelling Wealth Management Conversations" in 2018 that included some wonderful content on this subject. If you're interested in reading more, let me know and I can provide you with the entire document. But in brief, some major takeaways include:
Has It Always Been This Way?
Yes. Our political system has frequently been dysfunctional and filled with personal attacks. Remember when Aaron Burr shot Alexander Hamilton? Or when Thomas Jefferson advertised that John Adams was busy importing mistresses, and that he had a "hideous hermaphroditical character"? Whoa – that’s rough stuff!
Does The Market Care About Approval Ratings?
It appears not. Since Kennedy was elected, the sitting president has been viewed unfavorably by more than HALF the country 45% of the time. To boot, over the last 55 years, the markets have done the best when the president’s approval rating polled somewhere between 35% -50%. It seems like the market expects it at this point.
Can it matter?
Sure. No one really discusses the adverse condition of German stock market of the 1930s and 1940s, or the Russian stock market under Stalin. Yet, the reality is there are just way too many variables that the market considers.
Historically, the markets do better with a divided government than a unified one. When I read that, my mouth dropped. If we look more recently, if you didn’t invest because you disliked Obama or Trump – you missed about 14% average returns during their respective terms (as of this writing).
Some doomsdayers will say it's time to implement the 3 G’s plan: Gold, Guns, and Get Out of Dodge! But we don't recommend that course of action. We believe it is wise to avoid letting your political views affect your investment decisions. My clients know we are disciplined investors with a clear strategy – for our entire lifetime. Most of this just won’t matter over a 30+year retirement … so…best to not worry about this.