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Elections matter, they say. People wonder what effect the outcome will have on their finances. We are getting questions and hearing concerns about this election. Perspective is needed, both from history and about our current situation.
For each president since Bill Clinton, one person or another has urgently expressed to us the need to sell all of their investments because of the ruination that was sure to follow. Folks told us that Bill Clinton, George Bush, Barack Obama, Donald Trump were all, in turn, going to herald the end of prosperity.
Yet the markets have persisted, never failing to manifest an upward trend over extended periods—with ups and downs along the way. (For perspective, the Dow Jones Industrial Average is about eight times what it was the day Clinton was elected.)
The past is no guarantee of the future, of course. But many millions of people who wake up every day and go to work in their businesses or jobs seem to have a bigger impact than the one person works as president.
We understand and appreciate government that is supportive of private enterprise, reasonable regulation, and taxes that are not excessive. Many people feel we have that in the current administration; some worry about the erosion of these things. Three points are worthy of mention right now:
- Individual income taxes may go up no matter who wins. This was baked into the Trump tax reductions, which were written to go away after 2025. Even before the virus hit, we had record deficit spending and an unprecedented debt binge. Then programs to counter the virus increased the deficit. No matter who is president, our national finances may require fresh attention.
- Tariffs and other trade restrictions generally depress economic growth. We have many trade restrictions now, as we did in the Depression years of the 1930s. Policy changes in this arena would likely be beneficial to our future prosperity.
- Immigrants and the children of immigrants founded more than 40% of the Fortune 500 companies and have long been a wellspring of American vitality and prosperity. Currently, legal immigration is sharply restricted compared to past years. Restoring America to more of a destination for the best and brightest people in the world would probably be good for the economy.
Bottom line: elections seem to matter less than we think in the course of the American economy and markets. And any outcome in the current election is a mixed bag—some things will be better, some will be worse, no matter who wins. So what do we do now, to prep our portfolios?
Keep the faith; stay the course.
Clients, if you would like to talk about your holdings and the election, or anything else, please email us or call.
Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
All investing involves risk including loss of principal. No strategy assures success or protects against loss.
The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
“We the People of the United States, in Order to form a more perfect Union…”
So reads the Preamble to the Constitution, which frames the purpose of one of our nation’s fundamental documents.
The authors didn’t necessarily mean the plan was “flawless.” We’re not constitutional scholars, but a quick search will reveal that the word “perfect,” at the time, used this way, might have suggested something more like complete, confident, or whole.
In an election year, it can be hard to appreciate that idea. Party leaders insist on playing “spot the difference,” so our attention is often spent on divisions and comparisons.
Some people anticipate elections with anxiety about their holdings. They wonder how to “election-proof” their portfolio. History has some uplifting news for us here too. Again, it only takes a quick search to reveal that the outlook is generally okay immediately following a presidential election. Not “perfect” results or glorious returns, but generally okay.
No guarantees. Clients, we talk a lot about the long haul, and it is not measured in election cycles.
We are looking forward to an election season in which each of us can use our voices and exercise our rights, all in the name of improving this grand experiment, together.
We’ll see you on the other side, but in the meantime, call or write whenever you’d like to chat.