October 26, 2020
I hope this title grabbed you. We are eight days from voting for the next President of the United States. I have the distinction of having been around so long that the next election will be the 17th Presidential election during my lifetime. I started working in the markets in 1976, so for the last eleven elections I have had a professional interest in the results, and their potential market implications. Prior to that my interest in the elections was less about finances, especially in 1968 and 1972 when, as a teenage male, the Vietnam War had my attention.
Some things never change. The job of TV political pundits is to try to suggest that one party and its candidate is better than the other. Someone has a better way to tax, someone has a great jobs plan, someone else has a better direction for our energy strategy. We are forced every four years down the path of choosing the candidate we think is best: for the country, for our economy, for the markets, and for our pocketbooks.
Historical data enables us to go back and check to see what has happened in the past. Over the last 64 years, the facts show some startling results. During that period, Republican candidates for President won nine times, and Democratic candidates won seven. The best 4-year market return was Clinton’s second, which produced a 4-year return from the day after his election to the next election of over 90% in the S&P 500. The worst was Bush 43’s first term, where the market was down almost 19% election day to next election day. But overall, I see no trend that shows that the party of the successful Presidential candidate is a guide to how the markets react. So, what is important?
Business owners and market participants strive to make money. Those in the White House come and go regularly but, to be successful, businesses must last for years. The issues that have made the United States a great place to invest long-term have little to do with who is President. Success is driven at a much more granular level, by business owners making what may seem intractable decisions day in and day out.
Most seasoned long-term investors, business owners, and entrepreneurs will cite the following factors for the economic success of our nation. In the US, we have strong contract law and ownership protection rights that favor the individual over the state. We have financially strong and well-capitalized financial institutions that are overseen by thoughtful regulatory entities. We have the deepest and most liquid financial markets in the world. We have a workforce and business owners that are driven by incentives to produce, innovate, and be creative. Finally, we embrace a belief that even when under strain, our freedom and capitalism lead to job growth, a higher standard of living, and the dream of wealth and the betterment for our families.
Good luck next Tuesday. Please Vote.