markets

What To Do With Your Election Portfolio
photo shows U.S> Capitol surrounded by fall trees

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.

Every Share Sold is Bought

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We talk a lot about cycles, but there’s one truth to them that we could come right out and say more often: there are no ups without downs, no downs without ups. Night and day. Yin and yang. Buy and sell.

People sometimes lose sight of this reality, especially when talking about the waves of selling that engulf the markets from time to time, cratering prices. They might say, “Long term investing is all well and good, until the financial crisis comes and wipes out half your account—that happened to me.”

In the last crisis (2007–2009), the markets recovered and went on to post gains for many years. When I inquire whether their accounts have bounced back since then, some reply, “Of course not! Everybody had to sell out to save what was left!”

Life is too short for most arguments, isn’t it? We move on to other topics. But the fact remains: even on the worst days in the depths of the crisis, when the market was suffering large percentage losses, we believe every share sold was also bought. There are two sides to every transaction, a buyer and a seller. Not everybody “had” to sell out.

In the fall before the market bottom in March 2009, noted investor Warren Buffett wrote in The New York Times that the economy was likely to be larger—and company profits higher—ten and twenty years in the future.1 Therefore, he was buying.

We felt the same way.

But it may feel as if everybody is selling. In the crisis, one of you told us it was no longer possible to talk about the economy or markets at coffee in the mornings, because every single person there called you a fool for staying in or told you all your money would be lost. Another said the same thing about the Friday night dinner crowd—you felt lonely. But you persisted.

It is popular lore among financial advisors to presume that people are really not capable of investing effectively, pointing to behavioral economic studies. You know we have worked hard to find you, the exceptions: people who either have the native good sense to invest effectively or who can learn how to do it.

We believe that every share sold is also bought. We have a choice, which side of those transactions to be on. Clients, if you would like to talk about this or anything else, please email us or call.

Notes and References

1. Warren Buffett “Buy American,” The New York Times: https://www.nytimes.com/2008/10/17/opinion/17buffett.html. Accessed: September 24, 2018.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

All investing, including stocks, involves risk including loss of principal. No strategy assures success or protects against loss.