Recently, and about every four years, I get questions and concerns like this: “Should we consider moving some or all of our money to cash given the political uncertainty about the upcoming presidential election? I am afraid that if Trump loses to Biden the stock market will crash given how well it has done at the helm of the current president.”
Many folks asked a similar question of the current Pandemic (COVID-19), especially when the market began its gut-wrenching decline in March and the stock market, measured by the S&P 500, went down 34% from its February 19, 2020 high.
To most people’s astonishment, the S&P 500 is up 50% over the last 100 trading days, taking it back to just near the all-time high. Folks, this has been arguably the most incredible advance from a bottom back to the highs in market history that sent just about everyone, including the self-proclaimed experts, into an intellectual and theoretical funk.
The remarkable increase underscores what has been so accurately stated many times in the past. “The stock market will have found a bottom long before the news starts to get better.”
I note with grave displeasure that the vast majority of investors fall prey thinking that he/she can wait until the news gets better before they get back in the market. The stock market graveyards are full of investors who learned this lesson the hard way. Not to make a light of it, but I can hear Gomer Pyle straining his voice in chastisement over folks that try to time the market, saying, “shame, shame, shame.”
Aah, feels good to get that off my chest. Now I can take a more academic approach to this column. I recently read, with great interest, an intriguing 16-page commentary from the well-respected investment firm, Invesco, titled, “2020 US Presidential election, 10 Truths No Matter Who Wins.” From Invesco’s thought-provoking report, I found the following most interesting:
■ The stock market return was negative for a presidential administration only when the country was in a financial crisis (2008/G.W. Bush) or experiencing a stagflation spiral (1973/Nixon)
■ “Partisan” portfolios, which would only invest when a Democratic or Republican was in office underperformed, by millions of dollars, the “bipartisan” portfolio that stayed invested regardless of who was in office.
■ Some of the best performance of the stock market came when approval rating for the sitting president was in the low range between 36-50%.
■ In the final analysis, neither party can lay claim to the best financial market performance.
As I conclude this relatively short dispatch, let me suggest five things for us to never forget:
In closing, I argue with steadfast conviction that if we want stress-relieving, life-appreciating, joy-delivering, mood-lifting, butt-kicking joy, let’s stay away from the television and the newspaper, especially the political section! Instead, let’s be grateful for what we have, like the sun shining on our face instead of our grave. … That should be enough to make us all happy and thankful, regardless of who will be the next president.
Harry Pappas Jr. CFP®
Managing Director-Investments
Master of Science Degree Personal Financial Planning
Certified Estate & Trust Specialist ™
Certified Divorce Financial Analyst™
Pappas Wealth Management Group of Wells Fargo Advisors
818 North Highway A1A, Ste. 200
Ponte Vedra, Florida 32082
904-273-7955
harry.pappas@wellsfargoadvisors.com
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