Dear Mr. Market:
How dare we put you on the spot like this?!? What an awful question! How will you (the stock market) react if Trump wins or if Hillary wins? By the way…as an aside….a great client of ours recently asked why everyone refers to Trump by his last name and Hillary by her first name. Why is that?
Depending on which side you’re on, this question may initially seem like simple semantics but it’s not. Are you “presidential” if you roll with a campaign based on your first name? Do you “feel the Bern” or did you “Trust in Ted”? Whether you’re a proponent of Hillary for President or Hillary for prison…it’s still Hillary. Where are we at America?
At My Portfolio Guide, the one thing we typically don’t shy away from is having a clear opinion. There are some great firms out there that simply can’t give you one! You’ll hear what you want to hear. They fear losing your “vote” or ruffling feathers. Yes…we understand that balance too, but as much as our job is about deciphering news versus noise…it does become important to take a stance.
One of our favorite case studies on this is Charles Schwab; knowing the company quite well, it doesn’t take too long to learn that they won’t take a hard stance on anything. We could care less about politics but when you’re in the “investment advice giving” business you better have a more concrete opinion on the stock market than just “stay the course” or we’re “neutral” on seven of the 10 sectors in the economy.
Yes…when it comes to politics and wealth management, however, there is very little upside in taking a stance with a candidate or one political party. As much as we like opining on hard market facts …choosing or siding with one party/candidate does nothing but cause trouble; it also clouds the investment mindset. When you are locked in on one political party and agenda, you will inevitably be jaded and ignore the entire other side of the equation.
So…it now becomes a discussion not so much as to who “we like” but rather what will happen if one side wins or the other. As true fiduciaries of millions of dollars and countless dreams…that’s what “trumps” (pun intended) vivid opinions of “feel the Bern”, “make America great again”, or “Hillary for America”. What matters more in all this is not your political affiliation but your discipline and understanding of what actually moves the needle with the stock market.
It’s without question that the upcoming election is almost like no other in history! For one, it’s been an absolute circus and in many aspects created more division when what this country needs the most is true leadership. Our argument is not that the election is irrelevant or won’t impact the stock market; it’s rather that pounding the table for one candidate is dangerous for your “portfolio mindset”. In other words, too many people cloud their judgments and attempt to predict things based on what the likely policies of the incoming President will be.
Let’s take taxes, for example. You can be a huge proponent for a certain candidate’s tax policies and know every detail about them but if they can’t make their way through Congress…it’s a moot point. To that end, who controls Congress typically moves the needle much more than who sits in the Oval Office.
Another area that can be dangerous is trying to predict which economic sector might outperform others based on who wins the election. The better decision to make is to have a clear understanding of exactly where we are in the economic cycle. Knowing that we’re in a maturing bull market should guide you to know which asset classes (and economic sectors) are vulnerable versus which might weather an upcoming storm.
In summation, most crystal balls are always rather cloudy. The ones in use that have political opinions embedded in them tend be even more dysfunctional. Approach this election with as level of a head as you can. Focus on things you can control (like your allocation). By the way, our opinion on the stock market right now is actually surprisingly more bullish than almost anyone out there. If you recall we said this year would finish positive; what if we told you that a year from now we’ll be at least 10% higher than now…regardless of who wins the election?
For now, regardless of what side of the aisle you’re on, it’s a “wait & see game”. Even if you have zero faith in either candidate, have some trust in the many things that make this nation so great. It’s much too easy to find flaws and negative news. So, until next time dear readers…and let Mr. Market be the one to give you a pleasant surprise by year-end (even if you don’t like the election results)!