Last week, and before I left for South Dakota for a vacation and escape from the election nonsense, an email from a neighbor showed-up asking for me to make sense of an October Market Recap he had received from his financial guy. This was a lay-up for me and I notified my pal that I would be happy to oblige - after I had returned from my ringneck-chasing getaway.
I emailed him last evening as my last task before going to bed bone-tired. What follows is a distillation of what I shared:
Neighbor...
What you received from Mr. So And So, CFP® is a rather detailed recap of the investment market's out-performance for YTD 2024. It is nicely summarized and annotated with supporting details.
Contrary to some of the political rhetoric we've been subjected-to in the run-up to the election is the fact that the US economy is on a tear in most all of the sectors that matter. Inflation has returned to normal and I paid $2.77 last week at the Brussels BP for a tank of unleaded regular. You needn't look any further beyond the same observations and additional stats your guy provided. None of that data is imaginary and the markets reflect it. You, myself and others similarly situated in the 'ownership class' (retired owners of stocks, bonds and real estate with little if any debt) benefit greatly from an economic cycle such as this. Emancipated from raising and educating our children our focus turns-back to children, grandchildren and great-grandchildren - but without the demands of a day job.
Getting back to the markets, and pointing out something your financial guy did not address, is an interesting implication for tomorrow's election. When the S&P 500 Index rises in the final three months before the election the incumbent party typically remains in office. Conversely, a drop in the index has historically indicated that the opposition will claim victory.
In 12 out of the 15 presidential elections since 1926 the ruling party has benefited from a strong stock market performance in the three months leading up to the election and went on to win. That is an 83% streak.
While a streak such as this would signal a Harris win; a streak is nothing more than a streak. Streaks can be broken and I happen to believe that this election is too close to call. Even the betting markets are evenly divided tonite.
If I was still in the day job, and was communicating with my clients, I would be telling them something on this order: 'It is important to be mindful that the outcome of the election (whether it suits your personal politics or not) is not a reason to react emotionally. That invites investment mistakes. If you don't like the outcome of this election, there is a high probability you will be pleased with the mid-term elections in 2026. This is because the party that loses the race for the presidency this year will likely win the House in two years putting a halt to the new President's legislative agenda. That's just the way things happen to play-out most of the time. '
I went on the explain that polling suggests that neither party will hold a super-majority. In other words there will be divided government much as the Founders intended. This will require compromise.
So, as we watch the returns tonite we should remain mindful that our Constitution has survived 235 years. This will not be the last election and if the people dislike the policies they get; they'll get around to changing them eventually. Blah, blah, blah.
I closed with an admonition on a subject (I have blogged about many times) - that being the federal debt and deficit. The budgets under both Trump and Biden have manifested unprecedented deficits. Given the reality of record high employment and our country not being at war this aberration absolutely requires attention in the years ahead.
What I did not share is my skepticism over either candidate rising to this task. So time will tell.
All I gotta say is it has been a terrific game to watch for the last 16 weeks. Sudden Death Overtime? Who knows?
Sometimes elections, investment markets and football, are a roll of the dice.
See you all on the flip side....
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