“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,
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