Now that the most consequential election in recent history is over, and we have a president-elect to be sworn in on Jan 20, 2021. Politics and market commentators, and even presidents themselves, have always linked the performance of the stock market as a sort of barometer of the effectiveness of a president’s policies.
The data doesn’t support this link, and you should advise your investors to think critically before making an investment decision based on who’s occupying the White House. Over the past 120 years, the long-term performance of the market has shown almost no correlation with government policies.
Instead, we know 10 truths no matter who wins:
- Markets have performed well under both parties.
- Investors are better off staying fully invested.
- We do not radically re-engineer the U.S. economy.
- Key drivers of the stock market has always been earnings and economic growth
- Signature legislative impact is not always as expected.
- Predictions tend to be wrong.
- Monetary policy matters more.
- It’s ok if you don’t like the president. The market doesn’t care.
- No, this was not the most vitriolic election.
- Don’t confuse partisan politics with market analysis and keep your eye on your specific goal.
Staying the course has always made the most sense for investors. Even in these uncertain times related to the impact of COVID-19, investors should focus on staying positive and standing firm.