So much ink has been spilled regarding election predictions and how the markets will be affected. We feel that there is little reason for us to add to the noise!
Frankly, we have no idea what the short term ramifications of the election will mean to the markets. Of course, neither does anyone else! Here are just some simple thoughts/opinions we hope you will consider:
- Historically, which party occupies the White House has little to do with how the markets perform.
- Market sell-offs resulting from political shocks (e.g. Brexit) have recovered, most in extremely quick fashion.
- The primary drivers of major bear markets are recessions. This is not to say that a recession will happen soon. It may be years before we have one.
- Many factors (e.g. how expensive stocks were at the beginning of the bear market, severity of a recession, decisions made by the Fed, investor sentiment, etc.) will dictate the severity of the next bear market. Political actors such as the president and congress can influence markets but other factors are usually more important.
- All of that said, we believe that having a disciplined, risk management process in place is crucial at all times. Employing a systematic approach to exit the market (and enter) is a sound strategy, but especially important in situations where risk levels are high.
Regardless of the election outcome, we believe the decisions we make individually on a daily basis (e.g. saving and investing wisely, being productive) will be substantially more important to our long term fiscal health.