Regardless of your political affiliation, presidential elections can be a little frightening. With the constant drumbeat of negative news – terrorism, ISIS, crime, weather related calamities, earthquakes, poverty, budget deficits, etc. – every election can seem to be a life or death proposition. This year of course, is no different and each candidate is insisting that only they can save our country from disaster.
I recently attended an excellent presentation on the stock market and presidential elections. Needless to say, it was quite revealing and also reassuring. The theme of the presentation was that despite which party occupies the White House, our economy is remarkably strong over the long haul. While every election brings is own particular economic and political challenges, time and time again, the economy has demonstrated amazing resilience. As a result, the more focused an investor is on staying the course despite the current news cycle, the more likely he or she is to meet his or her investment goals. A couple of statistics bear this out:
- $10,000 invested (including dividends) in the stock market in 1934 would result in over $44 million today. The undeniable truth that is despite the Great Depression, multiple wars, Watergate, the oil embargo, Iranian hostage crisis, Savings and Loan crisis, the Great Recession, 9/11, etc., the stock has produced an average annual return of 10.8%.
- Successful investing depends more on the strength of the economy than whether the Democrats or GOP claim the presidency. Since 1936 we have had 20 presidential elections with Democrats winning 11 and Republicans winning 9. Surprisingly, there is little difference in overall investment returns between the political parties.
Of course, past returns are not predictive of future investment results and I would be lying if I denied that I had moments when I wondered if this period of time is somehow different. With annual budget deficits, anemic economic growth, unprecedented Federal Reserve intervention and our national debt exceeding $19 trillion, I don’t think it’s unreasonable to wonder if things really are different now. However, the presentation helped remind me that our economy is second to none and has always shown itself to be resilient despite seemingly insurmountable challenges. If you are uncertain about your investment objectives and long term goals, do yourself a favor and seek the help of an experience professional.