Updated: Sep 1, 2020
"If I'd have had more time, I'd have written a shorter letter" ~Blaise Pascal
As we head to the polls this fall, there seem to be many thoughts about how the market will react to the election. A piece that Invesco recently released offered “10 Truths No Matter Who Wins.” Let us take a look at those truths:
1. Markets have performed well under both parties: The S&P 500 Index delivered on average annual returns of approximately 11% over the past 75 years through both Democratic and Republican administrations.
2. Investors are better off staying fully invested: The best-performing portfolio over the past 120 years was one that stayed fully invested through both Democratic and Republican administrations.
3. We do not radically re-engineer the US economy: Among the biggest fears among investors is that a progressive candidate might radically re-engineer the economy. Remember: All presidents also need control of congress to make significant changes.
4. The historical narrative is not always as you remember it.
5. Signature legislation is infrequent and its impact often unexpected: Predictions and assessments about the ultimate impact of legislation are often far removed from the actual results. As an example, many predicted the Affordable Care Act would destroy small-business hiring. But since 2010 8.5 million jobs have been added in this sector.
6. Predictions tend to be wrong! This is by far the most interesting truth to me! One of the strategists I follow, Jeff Saut, recently said when he appeared on CNBC, “Presidents don’t make markets, markets make presidents!” So, why try to predict?
7. Monetary Policy matters more: For all the focus put on the executive branch, we would argue that it is monetary policy that matters more. The old adage holds true: Don’t fight the Fed.
8. Markets don’t care if you don’t like who’s President, and the bottom line is you don’t have to love what is going on in DC to prosper in the markets. Remember the market goes up 67% of the time.
9. No, this is not the most vitriolic election: It may be hard for you to believe, but did you see Hamilton? Our founding fathers used to duel with pistols!
10. The Misery Index tends to be better at predictions than the pundits. The Misery Index is a combo of unemployment and inflation.
Make it a great day!
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