KF Update – Election Thoughts

4 Minute Read

Good Evening,

I hope this email finds you and your families well, and you had a wonderful Fall season thus far!

First, I wanted to apologize for the delay in getting out what are usually my monthly emails to clients.  We have been very busy revamping our entire technology infrastructure, digesting all things Covid related to investments/financial planning, and preparing for both the end of the year, and 2021. 

I will be sending out a separate email in the near future with somewhat of a ‘End of Year Financial Planning’ checklist along with the tools we have available to clients.

With that said, one of the most contentious elections in recent memory is just a week away.  I would like to take this opportunity to share some of my thoughts, as well as how markets have reacted in past election years.  

In 2005, I started my career in financial planning, and got my first cell phone!  I remember learning how to text using the three letters above the numbers, and the first time I could read my email directly from my cell phone, the technology at the time was incredible.

If we look back over these past 15 years, so much has changed, particularly the way we receive news and information.  The independent newspaper industry is largely shrinking, replaced by 24 hour cable news networks and social media. 

The current business model of delivering news seems to have become more about playing on our emotions, and less on delivering fact based information for us to form our own opinions.  This is particularly true when the news reports on the daily moves of the stock market, potential volatility around a presidential election, or any other economic event for that matter.

A volatile day(s) in the markets is amplified fifty fold in 2020 versus years ago.  We cannot get away from it by simply not opening up our monthly investment statement.  Any semi-newsworthy economic event leads to hours of analysis, opinions, and predictions both ways of how the market will react. 

Now more than ever it is incredibly difficult to ignore the noise and just “Ride It Out” as we say.  But, as this most recent downturn proved once again, as difficult as it can be, it remains the most prudent strategy for long-term investing success.

As for the presidential election, let’s take a look at how markets have reacted over the past 100 years.  The below graphic is the growth of $1 starting in 1926 through 2019.  While the short-term is unpredictable, the general trend of the markets are upward, regardless of the party and overall economic conditions.

As to what the markets think will happen, interestingly, the S&P 500 performance in the 3 months leading up to the election has correctly predicted the presidential winner 20 of the last 23 elections.  If the S&P 500 was positive in the 3 months leading up the election, the incumbent party wins the White House, and the opposite if the S&P 500 is negative in those three months.  Here is the graphic:

The S&P 500 is currently up around 5% over the past 3 months with 5 trading days left until the election which bodes well for our current president.  That said, most national polls and odds makers show our current president as an large underdog with the exception our local pollster, Mr. John Zogby, who has the race within 2 points.  It’s anybody’s guess at this point how all of this plays out.

We certainly understand the anxiety with this election, the different ways the three branches of our federal government could be shaped starting in 2021, and the various ways the markets could react on a short-term basis.  History tells us that regardless of the makeup of the three branches, stocks follow an upward trend line over longer periods of time.

If you are interested in scheduling a review meeting to review your portfolio, or just have a quick question you can schedule a time for us to meet using the blue button below.  It links directly to my calendar and you can find a time that is most convenient for you.  You can always call the office also at (315) 801-9028.  I look forward to talking, and hope you have a great rest of what has been a beautiful Fall season.