Election 2020: How Will the Outcome Affect Your Portfolio?

Politically, I have always been a moderate. I like some Republican viewpoints and others from the Democrats. This position seems to offend everyone these days. Nevertheless, you may be happy to hear that the stock market will most likely do fine over the next few years regardless of who wins the election.

Dire predictions are almost always proven wrong:

Dire predictions of presidents tanking the economy or the stock market have almost always proven wrong. Why? Because regardless of who is in the White House, 150 million Americans go to work each day and try to find better, faster, and more profitable ways to serve their current and prospective clients. I could lay out a whole host of reasons why people’s fears are overblown, at least as they relate to the stock market, but I think the Hartford mutual fund company did a pretty good job of that in this piece: The Next President Is Unlikely to Sink the Economy—or the Stock Market.

Good investing is counterintuitive:

The Hartford also did a survey this summer of 958 investors. It is interesting to see how the respondents’ perceptions compare to past results. I frequently say that good investing is counterintuitive. Here are a couple of examples:

  • 47% of survey participants thought a Republican administration would be better for their investments compared to 37% who thought a Democratic administration would be better.

Although past performance is no guarantee of future performance, the S&P 500 has actually performed slightly better under Democratic administrations than Republicans since 1933. The Hartford piece (see link below) pointed out “Nearly all of the Democratic average outperformance can be explained by the boom years under Bill Clinton and the subsequent dotcom bust and Global Financial Crisis under George W. Bush. The difference in returns is practically zero if you excluded those two presidencies.”

Which election outcome do you think would be best for your personal finances?

The other survey question I thought very telling was: Which election outcome do you think would be best for your personal finances?

  • 46% thought the best scenario was a unified government where the Republicans control everything (Presidency, House, and Senate)
  • 32% thought the best scenario was a unified government where the Democrats control everything (Presidency, House, and Senate)
  • 22% thought the best scenario was a divided government where a different party controlled the White House vs. the Congress.

The reality is since 1937, the S&P 500 has performed 1.6% better on average per year when we had a divided government.

For more insights, see: The Election and Your Portfolio

Final Thought:

In my experience, more money is lost by trying to time the market or make investment decisions based on emotion or speculation about what “might” happen. My wealthiest clients are the ones who socked money away consistently throughout their careers and still stick to their investment plans regardless of what the news media is serving up.

Happy Election Day, and I hope your favorite candidate wins. ?