It will be all over in 5 short days, or should I say 5 L-O-N-G days. Of course, I'm referring to the presidential election. Is it just me, or does it seem like this presidential election cycle has been dragging on for an eternity? On November 5th, the uncertainty will end as we “should” know who our next President will be. Of course, I used the word “should” for a reason (see 2000 and 2020 elections).
Finally, the uncertainty will end – or will it?
When it comes to politics, it's anybody's guess.
Is there anything that is more polarizing and psychologically exhausting than political theatre? I might suggest that the only other field that is influenced by psychological fluctuations, irrationality, and randomness would be investing.
So many investors want to make investment policy out of their politics.
One of the most enduring myths of investing is that it’s vitally important to “the stock market” who wins the White House. It happens every four years, where far too many people make short-term investment decisions based on what they think (or fear) the outcome will be.
NEWS FLASH! – the stock market doesn't care about your politics! Take a look:
What should a rational, goal-focused, patient, long-term investor conclude from this chart? Well, let me help you:
- As the chart demonstrates, who the President is doesn't matter much.
- The equity market (as represented by the S&P 500) laughs in the face of your partisan politics and continues its upward and onward trajectory.
- It's best to forget your politics and stick to your financial plan by remaining invested. Damn your unnecessary interruptions and full speed ahead!
And as if to pour salt in the open wound of your party's candidate losing the election, investment money continues to grow (albeit to different amounts):
So, is the best course of action to change your investments based on who wins? As you can see from the chart above – remaining invested beats BOTH candidates by a landslide! It's not even close.
There are many things to fear when investing (i.e., not saving enough/not in the proper allocation), but one shouldn't be the one who occupies the large White House on 1600 Pennsylvania Ave.
The King of all unnecessary interruptions is politics!
Ah, Lon, what about 2024? I mean, it's the most important election in U.S. history, right?
I’m sorry, you mean to say that the other 59 elections dating back to the very first one in 1789 didn’t mean anything.
We have NEVER seen this level of political chaos before, right?
Au contraire mon frère.
How quickly we forget that in 1968, a sitting President (Lyndon B. Johnson) was effectively forced to withdraw his reelection bid due to his policy on the Vietnam War. When in April and June of that same year, you had two of the most influential political leaders of our time murdered by an assassin's bullet. (Dr. Martin Luther King in April and Senator Robert Kennedy in June).
Allow me to argue that while I personally don't remember that time (how could I, I wasn’t born yet), I have lived it through history books (Mark Kurlansky’s “1968 the Year that Rocked the World” is a good one). The fear in 1968 was terrifyingly real.
Ask anyone who lived through that time, and you'll likely get a powerful argument that today's political environment is nothing more than a flea on the butt of an elephant. (Do elephants even get fleas?)
You are a lifetime investor, following a plan that has always, I repeat, always worked. Presidents and their policies come and go, and the pendulum swings forever back and forth. There will always be political uncertainty.
Don’t let it distract you, and certainly don’t let it change your investment policy.
Stay the course, my friends.