One Day More: What Investing Can Teach Us About Elections

As I write this, we’re one day away from Election Day 2020. It’s been a wild, perhaps unprecedented year. I struggle using the word “unprecedented,” because I’m mostly convinced that there are few truly modern human phenomena, perhaps with the exception of speed, to paraphrase Aldous Huxley.

But I do believe that there are some lessons from investing that can provide us some insight into how we might want to approach, and respond to, this particular election, and maybe even future elections as well. 

Here are a few.

Prepping for a tranquil election season

So far, 2020 has been mostly serene, and I expect nothing to change as the election approaches.

I kid, of course.

We’re 82 days away from the election, and somehow, everything is political. Infectious diseases. School openings. Football. Everything.

Some of our clients have been asking about our thoughts on the impact that the election might have on markets, so I wanted to take some time to share some evidence that can guide us toward a reasonable conclusion. The conclusion is: History has shown us that the market has little correlation with the party in power in the White House.

A couple of years ago I wrote a post, part of which discussed the fallacy of pretending to have any idea what elections mean for markets. I thought I’d revisit this with some more data.

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Born on third base

Nick Foy, CFP®

Over the past couple of weeks, there’s been a pretty big shift in the news cycle: constant talk of a global pandemic gave way in a sudden, startling fashion to conversations about race after George Floyd was brutally killed, on video, in broad daylight, by a white police officer in Minneapolis.

Protests and riots have ensued, and a whole new level of anger has been uncovered as people have responded to the broader treatment of black Americans by law enforcement. It’s led to some uncomfortable conversations, and many white Americans have started to discover (or better vocalize their understanding of) the inequities that exist in our society.

By just about any definition, I was born on third base. I was born in early 1980’s America, into a home with two loving parents, into a neighborhood with great schools, and little crime. And I have white skin. I controlled none of this. I’ve never felt scrutinized when I walk into a store. I’ve never had an uncomfortable run-in with the cops. I’ve never been denied a job opportunity because of the amount of melanin in my skin.

As a kid, I’m not sure that I realized the implicit advantages I was afforded thanks to my fortuitous situation, but my Dad would travel all over the world for his job, and he’d always come back home to California and tell us we were so lucky to live where we did. He was right. But not everyone is so lucky, even in America.

We’re working hard to instill grateful attitudes into our kids. Not guilty. Grateful. They’re lucky to have been born into our household, and with that reality comes a great responsibility. It means we should work to help those in need. The oppressed. In fact, it’s demanded of us. 

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It Must’ve Been Really Scary When…

Nick Foy, CFP®

The news over the past two weeks has moved at a brisk pace, to say the least. The state of the world from just one month ago is virtually unrecognizable at this point as we’ve made bold steps to control an invisible virus.

Our partners at Dimensional posted a video the other day to offer some perspective, and I think you’ll enjoy it. We also thought we’d share some additional perspective too. 

The world now looks a lot scarier than it did in January or February, and that got me thinking.

I’ve often wondered how I would’ve reacted as an investor in 1929, when the stock market crashed and set off the Great Depression. In hindsight, it would’ve been great to say that I would’ve closely followed the rules of finance that have been developed through decades of research, but that would’ve been difficult for a couple of reasons: 

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What Type Of Investor Are You?

Nick Foy, CFP®

As fears about the spread of the coronavirus continue to rile markets worldwide, I thought I’d provide another update into how we (and our clients!) are fairing.

First, I’m sure there are some clients who have had sleepless nights over the past couple of weeks, wondering when life will get back to normal. The other day, my wife asked me how I was holding up, and I told her that I’m fine but I’m more concerned for you, our clients.

However, I’m also incredibly grateful. For sure, we’ve fielded some calls and e-mails from clients who have some (valid!) concerns. But for the most part, our clients have been seeking out opportunities to accumulate more stocks at a discounted price. 

Our trading systems and processes haven’t yet been stretched like they have for the past two weeks, and I’m glad to say that we’re doing just fine.

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Investing through uncertainty

Nick Foy, CFP®

As coronavirus fears have irked markets globally, it gives us an opportunity to redefine how we respond to uncertainty and its impact on portfolios.

Ben Carlson has done a nice job providing some thoughts on our headline risk du jour, but we want to give you some additional insight.

First, the nature of risk is that it’s unpredictable. And whether the cause of the turmoil is political, economic, health related, or some other nuisance, we know that the future, by definition, is unknowable.

Not long ago, the markets were deeply disturbed by the interactions between President Donald Trump and North Korean leader Kim Jong-un, and the potential for war between the United States and North Korea. Imagine having fallen into a coma in 2010 and awoken to see that as a headline. 

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Where We’ve Been; Where We’re Going (rd 2)

Nick Foy, CFP®

In July of 2018, I wrote a post that gave some details about my background and vision for Greenway. Take a look here, and I hope you enjoy it.

I thought it was time for a progress report, as the firm has now matured some, and it’s been a pretty great journey thus far.

Since I wrote that post we’ve:

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The SECURE Act is a mixed bag

Yesterday, the Senate passed the Setting Every Community Up for Retirement (SECURE) Act which had been gathering dust since May after it passed the House. It’s expected to be signed into law soon.

Ultimately the law is a mixed bag, and looks as if the insurance industry made a significant contribution to the bill.

Blair duQuesnay over at Ritholtz Wealth has done a nice job summarizing the good and the bad. Take a look at her write up here.