Good morning & happy Monday!
“Politics is the art of looking for trouble, finding it everywhere, diagnosing it incorrectly and applying the wrong remedies.”
– Groucho Marx, American actor & comedian 1890-1977
I’m not sure if you’ve noticed, but 2024 is an election year. There is this introverted guy named Donald Trump, I know you’ve probably never heard of him, running as the leading Republican against the current Democratic president, this young buck named Joe Biden. Biden and Trump are pretty good friends and share a lot of great ideas to make forward progress for America. No matter who wins I’m sure everyone will support the winner of the November election.
Yeah, right!!! 🤣🤣🤣
The 2024 election is likely going to be horrible. Attack ads, accusations, distorted records, buckle your seatbelts ladies and gentlemen. The only thing both sides can agree on is “This is the most important election of our lifetimes.”
My friends, I am very tuned into the political landscape and have very strong opinions when it comes to virtually every political issue. It drives my wife crazy because she is significantly less passionate about politics than I am. After about 10 minutes of me discussing a political issue, she usually stops me and says, “Ok, that’s enough, I don’t care.”
You know who else doesn’t care? The stock market.
Now, that is an overstatement, the market most certainly has candidates they feel will benefit or hurt their businesses, but regardless of who wins the presidency on Tuesday, November 5th, on Wednesday, November 6th America will be open for business.
I came across a fascinating piece of research in this space … check it out here:
This chart basically says that when a Democrat is in the White House Democrats think the economy is good, Republicans think it stinks. The same is true vice versa, with a Republican controlled White House Republicans are happy about the economy and Democrats are not. It’s the same economy everyone is living in, but how it is viewed changes based on who resides at 1600 Pennsylvania Ave.
My friends, this is very dangerous as investors, which is why I address it here.
It is critical for investment success that we divorce our politics from our investments.
“If Biden wins this county is toast, say goodbye to the United States” says the Republican. “Trump scares the crap out of me, and I don’t even know if we’ll have a country if he is elected” says the Democrat.
These are very emotionally charged issues, and I totally get it. For many of us our political viewpoints are a critical component of our identity. But businesses are going to keep working to generate profits no matter who sits in the Oval Office.
If you are politically engaged, you probably don’t have a natural opinion of Barak Obama or Donald Trump. You likely love one and strongly dislike the other. The S&P 500 was up 16.3% on average during the 8 years of Obama and up 16.0% for the Trump 4-year term.
What a huge mistake it would have been for an investor to adjust their investments because of their political views.
Let me illustrate this to bring this point home.
| Year | Election Day | Present elected | S&P 500 value when elected in | S&P 500 value when elected out |
| 2008 | November 4 | Barack Obama | 1,005.75 | 2,139.56 |
| 2016 | November 8 | Donald Trump | 2,139.56 | 3,369.96 |
| 2020 | November 3 | Joe Biden | 3,369.96 | ? |
Let’s assume I have $100,000 available to invest.
Let’s say I’m a Republican and on November 4, 2008, I say “No way! I’m not investing under this dictator” so I sit in cash. 8 years later I still have $100,000. Then when Trump is elected I say, “The republic is saved, I’m ready to invest.” My $100,000 is deployed on November 8, 2016, and by November 3, 2020, I have $157,507 (ignoring dividends).
Let’s say I’m a Democrat and on November 4, 2008, I say, “The republic is saved, I’m ready to invest” and I deploy my $100,000. I stay invested for 8 years but when Trump is elected, I say “No way! I’m not investing under this dictator” so I cash out and stay in cash during the Trump administration. My $100,000 would have grown to $212,733 (ignoring dividends) in the 8 years under Obama but then it stays at that level for the next 4 years.
Alternatively, let’s say regardless of who I vote for I stay focused on my goals and I don’t let Washington dictate my investment strategy. I stay invested the entire time. I invest $100,000 on November 4, 2008, and I stay invested for all 8 years of Obama and all 4 years of Trump. My $100,000 in the S&P 500 would be valued at $335,059. (ignoring dividends).
Only invested in the 8 years under Obama: $100,000 → $212,733
Only invested in the 4 years under Trump: $100,000 → $157,507
Stayed invested all 12 years: $100,000 → $335,059
See how dangerous it is to see investing through our political lens?
Please don’t do it!
On Wednesday, November 5, 2024 some of us will be very happy, some of us will be very disappointed, but all of us need to stay the course with our investment strategy.
No matter what happens with the elections, please know that we are here to support you and your investment objectives. Thanks for trusting us to help navigate these waters.
Make it a great week ahead!