Election Year and The Economy: Is it Something to Worry About?
“It’s different this time!” – Unknown
Unknown—seriously. I mean, it’s such a common chorus how can it be attributed to any one person?
But with November coming around, it’s gonna become a rallying cry for anyone who feels like their preferred candidate will lose and cause the market to tank. Here’s from Paul Krugman’s 2016 election night article, “What Happened on Election Day,” in the New York Times:
“So we are very probably looking at a global recession, with no end in sight.”
No matter your view of the President, I’ll take some artistic license on the lyrics sang by Mike D of the Beastie Boys:
“He missed it like this, he missed it like that, he missed it with a wiffleball bat.”
People get emotional and they think that because their candidate didn’t win, the world is going to sh*t. This Google search will bring up a lot of the recession commentary around the 2016 election.
We have had a lot of Presidential political party back and forth, so I looked at some data on election years going back to 1980. Spoiler alert: it’s more about the economy than the president. Here’s some S&P 500 data (rounded to whole numbers):
My advice? If you are a political observer, meaning a fan of debating others on your views and what’s important to you, great. Knock yourself out—this is your year, baby! But as an investor, you would be wise to distance yourself from your political ideology, the predictions of boom or bust based on the candidates and the inevitable rhetoric that will be inescapable as we narrow down to November.
1980, 1988, 1996, 2000, 2012 and 2016 are interesting because there was greater than a 20-percentage point swing between the low of the year and the final calendar year return!
Earnings and economic issues like jobs, productivity and wages are probably much more important. As you can see from the Percentage Point of Swing column, you can expect some volatility. But when the press starts hyping, “There’s a lot of volatility right now!” just remember what one of my original mentors in the business, Rob Tanner from DLJ, said to me…
“Dave, that’s like saying, ‘Gee there sure is a lot of gravity today!’”
Have the patience to weather the Percentage Point of Swing column and know what your cash needs are for the next 12-18 months. Cash is the best and least expense way to hedge a portfolio that I know of. You have probably never heard me say that, BUT IT’S TRUE!
You can always find a reason to sell, but there are even better reasons to have a plan to ride it out. Don’t believe me? While there are a zillion versions of this chart, Hat Tip to Michael Batnick for this one.
Look for some new things launching out of Monument this year on the content front. I’m excited that I’ll have some company in the content writing department this year and we plan to adopt some new digital mediums as well. If you missed Jessica Gibbs’ post on how the new SECURE Act may affect you, be sure to go check it out here. And if you are wondering what my predictions for 2020 are, you can see my short video here.
And finally, I wanted to send a thanks out to a client who wrote me a note a few days after my 2020 video, posted with the following pics:
I caught two very brief moments on CNBC last week and both times I saw a chart that you referenced in your VLOG….just thought it was interesting and Dave A was on the case before the mainstream financial media. All the best to your crew and see/talk soon.
Hat Tip to you, Redleg. I appreciate the message and pics.
Keep looking forward,
Dave
What’s Next?
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 Wealth Management), 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.
All indexes referenced are unmanaged and cannot be invested into directly. The economic forecasts set forth may not develop as predicted. 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 Monument Wealth Management. 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. Monument Wealth Management 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 Monument Wealth Management’s current written disclosure statement discussing our advisory services and fees is available for review upon request.
David B. Armstrong, CFA
President & Co-Founder
Dave got into the industry when he discovered his passion for finance in his mid-20’s. He’s a combat veteran and served as an officer in the United States Marines Corps on both active duty and in the reserves, retiring at the rank of Lieutenant Colonel. While serving on active duty, Dave was unable to spend money on deployments, so he became a self-taught investor. Along with a few bucks cash as a bouncer, his investing performance grew to be good....
IMPORTANT DISCLOSURE INFORMATION
Please remember that past performance is no guarantee 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 [“Monument”]), 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 Monument. 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. No amount of prior experience or success should be construed that a certain level of results or satisfaction will be achieved if Monument is engaged, or continues to be engaged, to provide investment advisory services. Monument 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 Monument’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: Monument 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 Monument’s website 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.
Historical performance results for investment indices, benchmarks, and/or categories have been provided for general informational/comparison purposes only, and generally do not reflect the deduction of transaction and/or custodial charges, the deduction of an investment management fee, nor the impact of taxes, the incurrence of which would have the effect of decreasing historical performance results. It should not be assumed that your Monument account holdings correspond directly to any comparative indices or categories. Please Also Note: (1) performance results do not reflect the impact of taxes; (2) comparative benchmarks/indices may be more or less volatile than your Monument accounts; and, (3) a description of each comparative benchmark/index is available upon request.
Please Remember: If you are a Monument client, please contact Monument, 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.