The 2020 U.S. presidential election has been a slog for just about everyone, no matter what your political orientation. Unfortunately, the tension is likely far from over – the outcome may not be determined for days, weeks or even months. Legal challenges are likely.
My advice to readers this week is to push back against the uncertainties of politics and to check your emotions at the door. Too often, I see investors conflate their political beliefs with their beliefs about economic outcomes – a very flawed approach, in my view. Feeling bad about the election outcome may lead to feeling bearish about the country’s economic future, which may lead to selling stocks for the wrong reasons. I think that’s a big mistake.
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Counter the Uncertainties of the Election by Focusing on Hard Data & Economic Indicators
Even though the outcome of the current election brings uncertainty and tension, the stock market responds far more to long-term earnings and economic growth trends over politics. Therefore, I suggest focusing more on the hard data and economic indicators that could positively impact your investments instead of getting caught up in the unknowns of the election.
To help you do this, I am offering all readers our just-released Stock Market Outlook report. This report contains some of our key forecasts to consider such as:
- The economic effects of the COVID-19 pandemic
- U.S. returns expectations for 2020
- Potential impact of the election
- Why you should be careful in determining what S&P 500 data to use
- Zacks Rank S&P 500 Sector Picks
- Status of global energy markets
- What produces 2021 optimism?
- And much more
If you have $500,000 or more to invest and want to learn more about these forecasts, click on the link below to get your free report today!
IT’S FREE. Download the Just-Released November 2020 Stock Market Outlook1
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I included the data below in a previous column, but I’m sharing it with readers again as an important reminder that economics and markets have pushed higher no matter what the political balance of power. The reason, in my view, is simple: politicians aren’t the engine driving the U.S. economy forward – corporations and small businesses are.
The balance of power in government is constantly in flux, and we should reasonably expect it to remain that way indefinitely. But history tells us the stock market goes up regardless of how power is divided:
S&P 500 Average Annual Performance, 1933 – 2019
I could write pages and pages on how certain election outcomes might result in different possibilities for stimulus, tax policies, new regulations or deregulation, deficit spending, and on down the line. But sketching out hypotheticals would be feckless, in my view. Even if we did know the balance of power today, no policy directive is assured and a policy proposed often looks a lot different than policy enacted. Politicians have a long history of over-promising and under-delivering.
What’s more, the kinds of changes that matter most, like big adjustments to the tax code, often take years to complete. Back in 2017 when President Trump was inaugurated, the administration had “The Ryan Blueprint” for lowering corporate tax rates ready to go. It still took a year to push through the changes.
Ronald Reagan is another example. He focused much of his 1980 campaign against Jimmy Carter on tax reform, but his signature Tax Reform Act was not signed into law until 1986. Investors have time to plan for changes.
Bottom Line for Investors
In my view, the uncertainty of the moment should inspire investors to focus on decisions and strategies that have historically led to consistent outcomes. Long time readers probably know what I’m specifically referring to: the value of owning a diversified portfolio of stocks over long stretches (20+ years) of time. In a moment rife with uncertainty, I think you can hang your hat on the value of owning a diversified portfolio.
At the end of the day, in my view, the stock market responds far more to long-term earnings and economic growth trends – not to changes in political leadership. Investors all too often conflate political beliefs with economic outcomes, which I think is a mistake. I strongly believe investors can achieve better outcomes – and also feel better in general – by countering the uncertainties of politics with consistent investment strategies.
So, while all eyes are on the election outcome, I recommend
not losing focus on the long-term outlook. To help you to this, I am offering all readers our Just-Released
November 2020 Stock Market Outlook Report.
This report looks at several factors that are
producing optimism right now and contains some of our key forecasts to consider
such as:
- The economic effects of the COVID-19 pandemic
- U.S. returns expectations for 2020
- Potential impact of the election
- Why you should be careful in determining what S&P 500 data to use
- Zacks Rank S&P 500 Sector Picks
- Status of global energy markets
- What produces 2021 optimism?
- And much more
If you have $500,000 or more to invest and want to learn more about these forecasts, click on the link below to get your free report today!
Disclosure
2Strategas, Quarterly Review in Charts, July 1, 2020.
3Strategas, Quarterly Review in Charts, July 1, 2020.
4Zacks Investment Management reserves the right to amend the terms or rescind the free Stock Market Outlook offer at any time and for any reason at its discretion.
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