In an election year, many folks start getting antsy – they’re concerned that if a certain candidate takes office, that their portfolios are at risk. As we have discussed on the blog recently, emotional decision-making is not beneficial to investors. A quick review of our history books reveals trends that disprove some of the chatter you’ll hear in the upcoming weeks.
1. That “gridlock” means nothing is getting done.
While the media would have you believe otherwise, gridlock doesn’t mean nothing gets accomplished. If the president doesn’t have a majority in the House of Representatives, the amount of legislation will decrease; however, progress can and does still occur despite the disadvantage.
2. The new POTUS is going to change everything right away.
There are a few exceptions, but generally, US policy changes are a slow-build, sometimes over the course of decades, in many cases. Take for example energy policies, tax, and immigration. Piece by piece, these policies evolved – so fear of sweeping changes on major issues would not be reasonable based on history.
3. The government has a strong effect on the economy.
Again, the media tends to fuel this association and often, political commentary attempts to teach a lesson in economics. In reality, businesses and consumers do have a greater effect on the economy than the government does. Tax laws and other policies can arguably have some influence, but not greater than that of the American consumer.
4. The stock market will crash if _______________ becomes President.
Many fear that an unpopular selection will lead to market turmoil. Historically, it is suggested that this is just not the case. Rather, a pattern of resilience or even indifference would indicate that there is little consequence in that regard.
5. The choice of President determines the state of the economy.
History tells us that this is actually opposite of what actually occurs. The economy effects who gets elected, not the other way around. If the economy is healthy, that usually means a win for the incumbent. A glance over history will show just how accurate this is, with only a few exceptions.
As the election process unfolds, the American public will be subject to the unsettling messages from either side. With millions of dollars spent on ad campaigns, there will be no shortage of negativity in the media. Investors should stay alert but cautious with their investing and stay in touch with their financial advisor.