Wall Street Watching Election Results
November 4, 2020
So now we wait. Like long-term investing, this election has required perseverance, persistence and patience. If you’re anything like us, you have anxiously awaited the outcome of this seemingly unending election cycle. And truth be told, all elections appear more crucial than the one before – this one in particular as we deal with the ongoing pandemic and seek answers to uncertainty surrounding the global markets and economies, taxes, monetary policy and further fiscal stimulus.
Initial results, including some from closely watched battleground states, caused the markets to rally Wednesday morning. While markets don’t like ambiguity, they have a historical habit of climbing higher over time regardless of who is in the Oval Office.
As history tells it, the domestic equity markets and economy simply aren’t affected in the long term by who’s in power in Washington, D.C. The major indices climb and dip within the first weeks of any victory – right, left or center. In 17 of the past 23 national election years, the S&P 500 index has ended the year in positive territory. In fact, the broad-market index averaged an 11% annual return through the past seven decades over a variety of administrations. Gross domestic product (GDP), a popular indicator of the health of the U.S. economy, also generally appears apolitical, performing well under any party.
Given the twists and turns of 2020 thus far, volatility is to be expected – no matter which party has control of Congress and/or the White House. But while we can expect the first few days after the election to be rocky, chances are good that the markets will eventually stabilize in the near future. Over the years, we have not seen any meaningful party-driven difference in long-term portfolio performance; but we do know that maintaining a consistent strategy under any market conditions has led to success for many investors. Time will likely prove that disciplined investors who stay the course will be the true winners.
In the meantime, we’ll keep our eyes open for any legislative changes or economic updates that could affect your financial plan. And we will do what we can to position your portfolio for the weeks, months and, more important, years ahead, and not the power shifts in D.C. Thank you, as always, for your trust in us.
While stocks and politics have had an interesting and varied relationship with every campaign cycle, we encourage you to focus more on your personal long-term financial goals. The end of the year is a good time for us to discuss your tax-planning strategy and how to best position your portfolio for 2021 and beyond.
Sincerely,
The Gratz Park Private Wealth Team