The American presidential election in 2016 demonstrated how focusing on who’s president can cause you to lose money. The night of that election, the Dow futures dropped seven hundred points, which meant the market on the morning after would open substantially down from where it had been before. That spooked a number of people, including one of my clients, Tom, who thought he saw chaos coming and got out of the market altogether. I’m not arguing politics one way or another here; I’m talking about loss aversion, about fear. When you consider what the market has done since then, rise over 50% – it’s clear that Tom’s focus on who was going to be President cost him dearly.
The WSJ wrote in a recent article titled, Stocks Typically Climb, Regardless of Who’s in the White House, “From 1929 through 2019, one party controlled both chambers of Congress and the presidency in 45 of those years. The S&P 500 on average rose 7.45% during those years, according to Dow Jones Market Data. The index was up 30 times and down 15 times.
In the other 46 years when there was a split government, the index climbed 7.26% on average, rising 29 times, falling 16 times and remaining unchanged once.”
When it comes to your portfolio, it can be a challenge to stand apart from the crowd and the emotions of the moment. This great country and American business have progressed dramatically over the past 100 years, through Democratic and Republican presidents alike. This election won’t change that. So regardless of who you vote for, remember that America’s best days lie ahead.
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Jonathan Bird, CFP®
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