Staring at Vigo

Traditionally during the Halloween season at my house, we spend Friday nights watching scary (but kid-friendly) movies along with eating some spooky treats. My kid’s favorite movie is, without a doubt, Ghostbusters 2. The villain in the film is a long-deceased tyrant, Vigo the Carpathian, whose spirit is living in a painting at the museum. Vigo tries to come back from the dead and destroy the world, but in the end, he is defeated by the Ghostbusters with an assist from the Statue of Liberty.

The movie character was defeated after a hard-fought battle, but another Vigo is looming large and could decide the next election. Vigo County, Indiana, is in the west-central part of the state and home to Larry Bird and my wife’s alma mater Indiana State University. The county got some national attention this week as everyone tries to gain an insight into what will happen in the upcoming election. Since 1952, whichever way the county has voted in the general election, that candidate has ended up winning. Even more astounding, since 1888, the county has picked incorrectly one other time, in 1908 (click here).

In recent weeks the stock markets have been trading in wider ranges as uncertainty increases before the election. Stimulus packages, tax policy, economic shutdowns, and increased coronavirus cases are just a few of the variables in investors’ minds as they try to figure out what is next. Truthfully, it’s an impossible task to see how the next few months play out. We have spoken with many clients from across the entire political spectrum who fear the same thing will happen to the markets post-election, but for entirely different reasons. One common theme among everybody is that they are ready for this to be over and decided.

Will the winner of the next election determine the future performance of the markets?

Of course they will, but there is little evidence that suggests that the companies that are represented in the market will sit by idle and watch their businesses deteriorate or not take advantage of opportunities that may present themselves regardless of the administration. Policy changes or new legislation enacted will be quickly adopted by companies to continue to grow their profitability and return equity to their shareholders. The chart below details the last twenty-three terms and their relative performance, given which party held the President’s office.

For good reason, politics elicit strong emotions, which naturally lead to feelings about our money and financial plan (both are extremely important and emotional). Our job is to look at the data, make the best decisions regardless of our emotions, and control the things we can control. As the evidence demonstrates, it’s impossible to connect the dots between the news and our investments. Attempting to do so can be a potentially costly endeavor.

So I have decided that rather than staying up all night to see who may be declared the winner of this contentious election, I will be staring at Vigo and know with a fair degree of confidence that they will be right for the 17th consecutive election.

Nathan Smith is a Portfolio Manager with Rather & Kittrell.