Bulls, Bears, Donkeys, & Elephants
As I write this on Tuesday morning November 8, 2016, Americans are turning out in record numbers to vote for their presidential candidate of choice. The good news is that half the country will be relieved with the outcome. The bad news is that the other half will be nervous or even angry. This has been the most divisive election in my lifetime, and I will be glad to move forward, regardless of which side wins. My hope is that we, as Americans, can come together in order to help tackle the challenges of the future as a united country.
For the past eighteen months, I’ve fielded questions on an almost daily basis about how the upcoming election results could affect investment portfolios and personal retirement plans. What I’ve discovered as I’ve probed deeper past the “normal” worry that seems to exist around every election cycle is, many times, it’s easier to worry about things we can’t control than the things in our life that we do have some control over. The worry that many of us feel is warranted, but not for reasons that you might imagine. So what to do?
While we can’t control election results, we can focus our energy towards having a financial plan that addresses what’s important to each of us. We can be aware of the difference between savings, speculation and investing. We can build portfolios to support our financial plans that are well diversified, especially given the last few years, when U.S. stocks have outperformed almost every major asset class. We can choose not to worry about short-term volatility. Markets tend to move in wild swings leading up to any Presidential election, then they return to setting prices based on the performance of the companies that make up the markets. We can choose to believe in the efficiency of markets, which then allow us to see that companies like Apple will still sell iGadgets and try to maximize their own profit in the process, no matter which candidate ends up in the Oval Office.
To this point, a $1 investment in the S&P 500 index in January 2000 would be worth $2.00 as of the end of October 2016. This performance was achieved in spite of the collapsing of the technology bubble, 9/11, the inflating and collapsing of the housing bubble, and the Great Financial Crisis. The markets also achieved this growth with Democrats, Republicans, good Presidents, and bad Presidents. During these challenging times companies adapted to the changing business and economic climate in order to maximize profits and sales for the benefit of their shareholders.
So, on this Election Day, I am reflecting on what has made this country great, and not speculating on how the results might affect the stock market going forward. Don’t let the promises of the bulls, bears, donkeys, or elephants come between you and your financial goals. Focus on what you can control in your financial life, and allow the markets to reward you in the long run.