Before the election, I saw a headline that a Democrat win would cause stock prices to plummet:
On the evening of November 3, S&P 500 futures markets were dropping sharply as the votes were being counted, and it looked like this might be right.
But then something changed, and the markets turned around and went higher.
By the close of trading on November 4, the headlines were glowing:
Then something else changed, and on November 5 the market reversed course.
People like to get very excited about drawing direct lines from election outcomes to investment results, but it is never that easy.
As I’ve written many times, when Trump got elected in 2016, people assumed energy companies would benefit. But by the end of his term, COVID happened, oil was trading at negative dollars per barrel, and energy companies were killed. When Biden was elected in 2020, people assumed energy companies would keep struggling under the new regime, but then Russia invaded Ukraine, oil prices spiked, and energy companies did incredibly well.
The world is a complicated place.
Sometimes prices move because of elections; sometimes they move because the CEO of the world’s largest company is accused of having an affair with a foreign spy.
None of us have any idea what direct impact the election outcome will have on the markets. But history tells us that it isn’t the end of the world. As this last chart shows, on the seven previous occasions since 1954 when the Dems swept the House and Senate under a GOP President, the one-year return has been positive.
Of course, we don’t know what the future holds, and the most impactful events will inevitably be the ones nobody expects. But that is nothing new. We have never known, and we will never know. That is why financial planning requires embracing uncertainty and building a framework that doesn’t need to change based on scary headlines or which party wins an election.
Personal Note:
Last week we had our client appreciation event at Eddie V’s. I had such a good time that I forgot to take pictures. The only evidence from the evening is this one Crystal took of Austin and me with our fathers-in-law.
Thank you so much to everyone who came out.
In completely unrelated news, my middle child turned 12 last week.
We took him out for crab legs to celebrate. He’ll tell you it is his favorite, but I suspect what he really likes is that his older brother is allergic and will get hives if he tries stealing any of his food.
Thanks !
I agree the market has been interesting to watch since the election. Waiting to see what happens with NVIDIA due to all the turmoil from CEO stepping down.