What a month this has been. What a year this has been!
I feel like I’ve got many more gray hairs than I did in September.
How about you? How are you feeling?
I have done a decent job managing the amount of media content I absorb in 2020. I used to be addicted to information, but lately, I’ve been seeking more peace and quiet. Less time checking for updates and headlines, and more time outside as well as capturing memories with my kids.
It’s time to put down the phone, unplug for a bit, and take a break from the doomscrolling. I recently watched “The Social Dilemma” on Netflix, and encourage others to do the same. It was an eye-opener!
Now that the election’s been (kind of?) called, everything will get back to normal. Right?
I think that’s optimistic. We’re still in a pandemic after all.
Signs are pointing to our next president being Joe Biden. But votes are still being tallied, court challenges are being issued, and recounts have been triggered.
And control over the Senate hasn’t been decided. But, at this point, it’s looking like the Republicans will retain control.
Election Day 2020 may be in the rear-view mirror, but not everything is resolved obviously. I was hoping to post this blog sooner, in fact, but didn’t because of all the chaos.
So while nothing’s completely settled yet, investors seem upbeat! We have this going for us, at least. People are likely hoping that:
- Stimulus talks will begin again. Depending on the Senate results, some estimate the amount of stimulus could vary by 2 trillion dollars. Most expect something, but the amount is unclear.
- The government will get back to fighting the pandemic now that the election’s over. They have to, COVID cases have been on the rise. It took 8 months (March-October) to register nine million cases worldwide, and just 10 days to get to the 10 millionth case.
- That a vaccine may be coming soon. At least we’re seeing some light at the end of that tunnel.
So, is it true that markets perform better when the government’s divided?
It’s not so cut and dried as that. Check it out:
In some cases, a split government correlated with stronger market performance on average.
In others, a sweep of both branches turned out better. (Wondering why there isn’t a bar showing a period when Republicans controlled the Senate and Democrats controlled both the House and the presidency? That combination didn’t happen between 1929 and 2019.)
But let’s remember three important things:
- Correlation is not causation; there’s a lot more at play than who controls the federal government.
- Past performance doesn’t predict the future.
- Since our sample sizes are small, we can’t draw strong conclusions.
Here’s another way of looking at elections and the markets, historically at least. I’ve shared this chart with many of my clients:
This study, analyzing data from 1896 to 2020, looks at the Dow Jones Industrial Average performance. It compares a fully invested portfolio versus those invested only when a Democrat or Republican was in office. Those thinking they can time the markets might want to think again.
Here’s a better thought: can we take a moment to pause and be thankful?
Thankful that we can determine the next leaders of our country through democratic means.
Thankful that even with all the divisive politicking we can expect a peaceful transfer of power from one administration to another.
Thankful that we can disagree safely.
I don’t know what your politics are, but I hope we can each do our part to contribute to respectful discourse and approach those who don’t share our beliefs with humility and open dialogue.
Wishing you calmness…Brandon
Risk Disclosure: Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. Past performance does not guarantee future results.
This material is for information purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security. The content is developed from sources believed to be providing accurate information; no warranty, expressed or implied, is made regarding accuracy, adequacy, completeness, legality, reliability or usefulness of any information. Consult your financial professional before making any investment decision. For illustrative use only.