With the presidential election now just a month away, I’m seeing more and more stories in the news about how and whether the presidential election (and subsequent administration) may affect investment portfolios. And fortunately, the ones I’ve seen have been prudent in cautioning investors against making changes based on whoever wins the presidency.
For example, in an article about the performance of a “Republican” portfolio (which included energy and defense stocks) vs. a “Democratic” portfolio (invested in infrastructure and alternative energy), the Wall Street Journal’s Steven Russolillo writes, “The broader takeaway is the danger of making political bets in the stock market. Even if an investor correctly predicts a political outcome without exogenous factors taking over, it doesn’t mean financial markets will behave accordingly.” Russolillo concludes by saying that mixing politics and portfolios can be a dangerous recipe, and I agree.
Dimensional Fund Advisors (DFA) just released an issue briefing and PowerPoint presentation that traces monthly returns for the S&P 500 Index for the last 90 years, highlighting Republican or Democratic presidential wins. The chart shows that election month returns stayed within the normal range of returns, no matter which party won. DFA’s take: “Trying to make investment decisions based on the outcome of presidential elections is unlikely to result in reliable excess returns to investors.”
As I wrote in September, politics and politicians can affect many aspects of our lives – and our pocketbooks. But nothing will serve you better than establishing and maintaining a well-planned, long-term approach to investments. If you don’t have an investment strategy or financial plan, consider working with a qualified, fee-only fiduciary financial adviser to create one – it’s never too late, and the results can include greater peace of mind, especially during heated presidential races like the one we’re experiencing right now.
Choosing the right financial adviser can be a daunting process, so we’ve created a free e-book that outlines three major factors to consider when choosing whom to trust with your hard-earned money. I hope you’ll check it out. And, if you have additional questions, please feel free to contact us at AMDG Financial anytime.