I’ve always been fascinated by general elections. For as long as I can remember, I have been glued to the TV on election night. I even host a watch party with close friends and family. We play presidential trivia, the kids vote for their favorite “candidates” (usually cartoon characters or stuffed animals), and in general we celebrate the privilege and the process of electing the next president.
That is not to say that I’m a political junkie. I’m not. I just find the process intriguing, and yes, entertaining. The entire country is captivated for months leading up to the event. It’s impossible to turn on the TV or radio and not see or hear political ad campaigns. There’s mudslinging and debates, fact-checking and polls. The media is saturated with it. Vegas sets gambling odds. Even our entertainment is engaged. Who can forget those classic SNL skits with Dana Carvey portraying both George H.W. Bush and Ross Perot, and the late great Phil Hartman as Bill Clinton?
It’s hard to not get caught up in the frenzy, and the wonderful world of finance is no exception. Market experts are full of predictions. Forecasts are projected. Volatility and uncertainty creeps in. As advisors we get a lot of questions. How are we positioning for a Republican/ Democrat victory or a red/ blue sweep, or a Congress that’s gridlocked? What if it’s different this time? What if it’s not? All valid questions, right?
Don’t get me wrong, elections have consequences. But I fear that we place a little too much emphasis on who is sitting in the oval office than we should.
Two months after the last general election, there is still a lot of speculation swirling. Today, as I’m writing this blog, we are awaiting the results of the Georgia Senate runoff. By the time this is posted, the votes will probably be tallied. The results will effectively determine who controls of the Senate. There could be major legislation changes. It could affect how you save for retirement. It could affect how much you pay in taxes. All of these things impact the markets to some extent.
So do we make moves based solely off of what could happen? When developing a financial plan, and implementing an investment strategy, we need to focus on things we can control. Are you carrying too much debt? Are you sitting on hordes of cash and losing purchasing power? Are you trying to time the markets?
Nobody truly knows what is going to happen, and the markets are known for making so called “experts” look silly. Case in point: Going back to WWII, the stock market has performed better under Democratic presidents than Republicans, who traditionally favor lower taxes, smaller government, and more conservative spending (typically synonymous with market growth). You can argue that one benefits from the economy and policies they inherit, but this is in no way meant to be a political commentary. I am not arguing for one side or another. The common theme is that regardless of politics, pandemics, terrorist attacks, wars, you name it; the stock market trends higher over time.
If you have a solid financial plan, the best course of action is to stick with it. If you don’t, let’s set up a time.