We are two weeks out from the presidential election, and
as the world begins to adjust to Donald Trump's shocking upset win stock market
investors seem to be feeling comfortable that his presidency will be good for
business. All four major indexes reached
all-time highs this week, and while rising rates have hurt bond prices in the
short term in short order higher interest rates will mean more cash flow for investors
in bonds and CDs as well. So it
looks like the outlook for our investments is good for the next four years,
right?
Not exactly. The
chart below was published on Forbes.com this summer, and it shows that
supposedly pro-business Republican administrations have seen S&P 500
returns significantly lower than their supposedly anti-business Democrat
counterparts.
Or course this particular time frame includes horrible
returns entering the Great Depression for the GOP and corresponding tremendous
returns for the Dems coming out of that era.
But even dropping off those two outliers, Democratic presidents still
have had a historical annualized advantage of about 9% to about 6% in market returns
during their time in office.
Is this proof that Democrats are better for the economy
than Republicans...or did the pro-business policies of the Republican
presidents come to fruition in the ensuing years of Democratic presidents?
Was George W. Bush a terrible president whose
governance caused an eight-year drop in stocks...or was it that after four terms of returns in the mid-teens markets we were bound to have a pullback and Bush simply had the bad luck of being in office at that time?
Did President Obama rescue us from
destruction...or was he fortunate to be president after an eight-year
correction and simply presided over the inevitable comeback?
The answer for me is - and should be for your financial decision-making - that it doesn't matter.
Whether you love or hate the current administration, the gains in the
market during the Obama presidency are indisputable. And whether you are excited or fearful of the
next administration, we should expect lower stock returns over the next four
years...because that's what always happens.
We know that
history tends to repeat itself.
And we
know that predicting the future is impossible to do other than by luck.
If we can remember (and follow!) these two simple truths, a
successful investment experience is bound to follow
The key to financial success is having a plan and
sticking to that plan. That's easy to
say but hard to do, especially when it's your own financial future on the
line. If you think fiduciary advice with
no product sales could help you achieve financial success, we would be happy to help.