Explore Our
“Off The Wall” Blog

Unique, straight-forward, unfiltered opinion on topics of concern for individuals with newfound wealth.

The Economy, Not Markets, Decides Elections

U.S. News and World Report Smarter Investor

Incomes growth is a big deal, and it’s still weak.

Next Tuesday is Election Day and the so-called experts have been attempting to predict the race for months. As usual, there is no clear consensus.

The presidential election results are very much intertwined with the markets and the economy, but markets don’t decide elections. The stock market does not generally predict the outcome of the election—a weak stock market does not favor the challenger, and a strong stock market does not favor the incumbent. A good example of this would be George H.W. Bush; he lost the 1992 election, even though the stock market was up 57 percent during his term. Franklin D. Roosevelt was re-elected in his third and fourth terms despite losses in the stock market. Voters are not generally willing to tie stock market returns directly to the president.

After the election, however, there does appear to be an impact on the stock market depending on whether the incumbent or challenger is elected. For example, there is often a material impact on corporate profits that is a direct result from regulatory policy coming from the White House or legislation passed by Congress, which this time could mean moves for industries that are heavily regulated such as financials, healthcare, and energy, to name a few. But broadly, the market performs well in an election year. In fact, over the last 16 presidential election cycles, there have been only three election years that suffered a stock market loss (as of this writing, the S&P 500 is up around 12 percent ).

From a historical perspective economic data, not stock market performance, serve as a predictor of whether the incumbent wins or loses.

James Carville is credited with saying, “It’s the economy, stupid,” and he’s right. Look at the inflation-adjusted, after-tax income growth in the year leading up to the election. If that measure of growth is around 3-4 percent, the incumbent historically gets 50 percent of the popular vote. Many voters tend to vote their pocketbooks, and the income measure also captures several other key factors including the unemployment rate. As reported by Joseph Carson, U.S. economist for AllianceBernstein, after-tax, inflation-adjusted income rose at only a 0.8 percent annual rate in the third quarter. This suggests that the president faces an uphill re-election battle, though clearly, factors other than inflation, taxes and income have a bearing on the election. However, income growth and related job creation are key measures by which a presidency is judged and they often determine the election outcome.

I will make my prediction next Wednesday morning. I’ve never have been wrong yet.

Dean J. Catino, CFP®, CPRC, is a managing director and cofounder of Monument Wealth Management in Alexandria, Va., a full-service investment and wealth management firm. Securities offered through LPL Financial. Member FINRA/SIPC. Monument Wealth Management has been featured in several national media sources over the past several years. Follow Dean and Monument Wealth Management on their blog, Off The Wall, on Twitter at @MonumentWealth, and on their Facebook page.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendation for individual. To determine which investment is appropriate please consult your financial advisor prior to investing. All performance references are historical and are not a guarantee of future results. All indices are unmanaged and may not be invested into directly.

Read the article on U.S. News & World Report here! >>

IMPORTANT DISCLOSURE INFORMATION

Please remember that past performance may not be indicative of future results.  Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Monument Capital Management, LLC [“MCM”]), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.   

Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions.  Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from MCM. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. MCM is neither a law firm nor a certified public accounting firm and no portion of the blog content should be construed as legal or accounting advice.  

A copy of MCM’s current written disclosure Brochure discussing our advisory services and fees is available for review upon request or at www.monumentwealthmanagement.com/disclosures.  

Please Note: MCM does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to MCM’s web site or blog or incorporated herein, and takes no responsibility for any such content. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly.  

Please Remember: If you are a MCM client, please contact MCM, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services.  Unless, and until, you notify us, in writing, to the contrary, we shall continue to provide services as we do currently. Please Also Remember to advise us if you have not been receiving account statements (at least quarterly) from the account custodian.  

Stay up to date!

Subscribe to our “Off the Wall” Blog for articles and videos on all things wealth management, by all members of our Team. Unlike Facebook, we will never share your data with anyone.