Stocks & Politics

Stocks & Politics – Do they mix?

With 53 days left to go until the 2020 November 3 election, we thought that this would be a good time to go over some of the myths and beliefs that many people have when it comes to Presidential elections, and what impact they may have on the economy and the stock market. We understand that many of our followers have political points of view, and we would like to dispel any unproven theories and ideas as far as investing goes.

Clients often tell us that if a democrat is elected President, then this is a sure sign to sell your portfolio, go to cash and sit on the sidelines. At boodle, we do not subscribe to this line of thinking. We can recall back in 2009 when Barack Obama started his first of two terms that many “experts” said he would cause the stock market to “crash”. At the time we didn’t see it that way and urged our clients to stay with their portfolio allocation, and sure enough, the market went higher for the year and finished with a return of nearly 29% as measured by the “total stock market index”.

Some of our clients felt that if a Republican won the White House, then surely, stocks would rise for that year. Take a look at 2001, with George Bush in the White House and a loss of nearly 11% in the market. No, the stock market is more complex than what lies on the surface, and oftentimes, one must look deeper than who sits in the Oval office.

At Boodle, we take into account the interest rate environment, employment, company earnings, and many other factors to determine a likely outcome in our investment portfolios. The market should be thought about in terms of “forward looking”, and discounting. The market takes note of who the President will be, and then it discounts the initial reaction of investors. Over time, the market will factor in dozens of factors and then we, at Boodle will make our forecast on future stock market returns. This helps allay the worries & fears of our clients, should the market turn in one direction, and it also produces caution in our forecast, should that point of view be warranted.

The Stock Market works best when you create a plan of action, commit to your plan, and then stay the course over a chosen number of years. Ignore the financial talking heads on television, and the screaming headlines in your newspapers and stick with your plan, and overtime you should see amazing results that will mirror your original thoughts when you first set up your portfolio. Investing is a little bit easier when you have a partner like boodle, helping to steer your “financial boat” into the calm waters of financial freedom.