Mind Games: Political Noise

We are entering the season of a lot of political noise. We are already hearing how this is the most important election of our lifetime.  But is that really true?

In 2016 they said it was the most unprecedented election ever.  In 2012 they said it was the most important election ever and in 2008 they said it was the most important election in history.

Isn’t that interesting?  It seems like every modern-day election is the most important in all of history. But that can’t be true.  What is true is that the media needs to make present news the most crucial and urgent so you will tune in.

Regardless, you still may wonder, what’s the market going to do based on election outcomes?

When we look at past elections, we find there is no correlation between party in the white house and security returns. Since 1961, there have been only two presidential tenures that had negative returns, and both of those were Republican presidents. One of those faced a significant oil embargo and the other dealt with both 9/11 and the beginning of the financial crisis. Presidential party doesn’t drive returns; it’s the external events that drive returns much more than political parties.

While we may be tempted to invest based on our political beliefs and how we feel, that can be very costly. Historically, the average investor who is influenced by emotions and headlines, has performed quite poorly.

Make no mistake. This election is a catalyst – to how you choose to invest.  Do you allow news headlines and emotions to influence your decisions, or do you remain disciplined to your plan? Choose wisely.

By Anthony C. Williams, CWS, ChFC, MRFC, CLU | Investment Advisor Representative | President & Founding Partner of Mosaic Financial Associates & Orthopaedist Advisory Group | Securities and advisory services offered through Cetera Advisors LLC, Member FINRA/SIPC, a broker/dealer and a Registered Investment Advisor.  Cetera is under separate ownership from any other named entity.

© The Behavioral Finance Network

Source: J.P. Morgan Asset Management; (Top) Barclays, Bloomberg, FactSet, Standard & Poor’s; (Bottom) Dalbar Inc. Indices used are as follows: REITS: NAREIT Equity REIT Index, EAFE: MSCI EAFE, Oil: WTI Index, Bonds: Bloomberg Barclays U.S. Aggregate Index, Homes: median sale price of existing single-family homes, Gold: USD/troy oz., Inflation: CPI. 60/40: A balanced portfolio with 60% invested in S&P 500 Index and 40% invested in high-quality U.S. fixed income, represented by the Bloomberg Barclays U.S. Aggregate Index. The portfolio is rebalanced annually. Average asset allocation investor return is based on an analysis by Dalbar Inc., which utilizes the net of aggregate mutual fund sales, redemptions and exchanges each month as a measure of investor behavior. Returns are annualized (and total return where applicable) and represent the 20-year period ending 12/31/19 to match Dalbar’s most recent analysis. Guide to the Markets – U.S. Data are as of June 30, 2020.