The US elections are just a little over a month away, and the investment markets have been volatile, which is normal before an election. Many investors wonder if they should make changes in their portfolio in light of one candidate or another potentially winning the Presidential election.
Dr. David Kelly of JP Morgan has often said that investors should not let their political point of view impact their investment decisions. Unfortunately, this is very difficult for the majority of investors.
The chart above shows how US consumers view the economy by their political affiliation. When the economy was growing under President Bush and Trump, Democrats had little economic confidence. When the economy was growing under President Obama, Republican confidence was stunted. It seems that people look at the economy, and as a result the investment markets, through blue and red colored glasses. This skewed point of view has led to investors making mistakes that cost them money.
As we approach these elections and hear and view the ever increasing fear based ads on both sides telling us how the economy and life will fall apart if the “other guy” is elected, don’t succumb to the rhetoric and fall into the trap of thinking you must make investment changes just in case “your guy” is not elected.
Presidents and their policies can make the economy a little better and a little worse, but very rarely do they dictate whether the economy will grow or fall into recession. Economic growth cycles and recessions will occur regardless of which candidate wins the election.
If the past is an indicator, absent from other factors, volatility will ease after the election and businesses will figure out what they need to do to generate profits regardless of who wins. And as an investor you will gain from stock market increases from a growing economy whether “your guy” or the “other guy” wins.
It is not time to jump off a bridge because of fear but to maintain a reasonable long term investment approach based on your tolerance for risk and your overall financial goals.