It isn’t surprising that the upcoming presidential election is looming large in the minds of our clients. The media, including the financial media, devotes a great deal of attention to presidential elections. However, we believe that the person sitting in the Oval Office does not affect investment markets as much as people may think.
Here are some numbers to consider:
1. 87% of investors believe that the president does have influence on the stock market.
2. A higher percentage of investors believe that a Republican president will be better for their investments.
However, if we look at returns during different administrations dating back to 1961, returns have been better under Democratic presidents.
I am not trying to influence anyone’s vote and I’m certainly not endorsing a candidate. Instead, I want to emphasize that the president has very little influence over short-term investment markets. I am sure that these numbers are skewed by the fact that the Clinton presidency coincided with the internet boom, while the internet bust occurred during the Bush presidency. In my opinion, neither president deserves much credit or blame for that technology cycle.
Our choices regarding government do have an affect on the long-term economy. However, there are checks and balances in our government that limit what any one person can do to help (or harm) America’s economy. The timeline may be an issue as well. I don’t believe that the consequences of government action always surface during a single presidency and perhaps not even during a second term.
Remember that markets react before the news. Investment markets are always looking to the future. If the market was particularly concerned about the presidential election, it would have already reacted. So far 2016 has been a positive year in most investment markets.
Bottom Line: A presidential election, like many other media events, should not significantly change your investment approach.
From the desk of Kris CarrollE-Newsletter, Market Update