What do we think? – Part 1
In this series of posts, we’ll try to address our answers to the most commonly asked questions from clients and investors during this time. For context, it is the end of August 2020, and we are in the midst of the global COVID pandemic, its related recession, and a highly emotional election season. We’ll start by addressing what we feel the implications of the election will be for long-term investors.
In short, we have never subscribed to the idea that a single person, the US President, has an out-sized impact on financial markets or the broad underlying economy. The US and global economies are large and complex ecosystems, and the US political situation is only a single variable that contributes to the system. That is not to downplay the political situation we now find ourselves in; polarity is very high, emotions are strong, and ideological extremes have penetrated every corner of our lives.
Lately, concerned investors will ask if we should make portfolio changes to protect against a hypothetical election outcome that they personally fear. This reminds me of discussions with clients just after the 2016 election who were sure that an unknown President Trump would torpedo the economy. To be fair, the same conversations happened in 2008 and 2012 when a certain faction of investors were just as sure that President Obama would destroy the US and World economy. We’ve been trained by the media that whoever the president is controls the hidden levers of the markets and the economy, and this is just not correct.
History shows that financial markets don’t care much who the president of the United States is, or to which party he belongs. But ‘this time is different’ you say? I concede that the national temperature feels very high right now. Is this time different than 1968? Many of you lived through that period, and I’d contend that the outlook was bleaker then. Going further back, how about 1914? Or even back to 1860? Human economies continue to advance, through good times and bad, and in the long term this trend is likely to continue.
We believe America is a strong project in human civilization and self-government. In spite of the current stressors to our culture, political upheaval, and global health concerns, the long-term investor remains wise to stay engaged in markets.
In the coming posts, we’ll start to outline some of more impactful near and long-term concerns that we have for the investment landscape.
Jared Walsh CFP®, CPA
Shawn Goetz, CRPC®
Reservoir Wealth Management