Investing Perspective in an Election YearOctober 6, 2020
by Curtis Burkholder
As we enter the fall season with changing leaves and weather, it is easy to feel the world around is changing as well. However, as the writer of Ecclesiastes wrote, “There is nothing new under the sun”. In light of all the changes, we can be paralyzed by feelings of fear as we consider the upcoming election, the nationwide racial unrest, and the ongoing Covid-19 concerns. It is important to maintain a long-term perspective and look at the facts to confront some of our emotions and the pictures we paint in our own mind. It is natural to want to react and wait to invest for a “better time” or when “things don’t seem as scary”. However, as we will look at below, the facts tell a different story.
In looking at historical market averages, the S&P 500 Index has averaged approximately 11% over the past 75 years. This is a time period that covers both Democratic and Republican administrations. If you fast forward 2 months from now, the election will be over. Some people will be happy, and others will be fearful based on the winning candidate. These emotions can lead us to make irrational investment decisions. We need to always remember that it is important to remain invested in the markets and not give in to fear.
A second fact to consider is that you don’t need to like who is President to do well in the market. According to Invesco, some of the best returns historically came when the presidential approval rating was between 36-50%. This occurs approximately 40% of the time. Take a moment to stop and reflect on this – the best returns in the stock market have come when half or more of the country has not approved of the sitting president.
A third fact to consider is that while we may feel this election is more divisive and contentious than in the past, we can look at our history as a nation and find another political disagreement that was more contentious. In 1804, the sitting Vice President of the United States, Aaron Burr, engaged the former US Treasury Secretary Alexander Hamilton in a duel. This duel led to the death of Hamilton. While there are strong opinions on either side of the political spectrum today, none of us expect to see the Vice President (from either party) engage in a duel! As a nation based on freedom, there will always be different opinions and perspectives. We cannot let the political tensions impact our investing decisions.
As always, if there are significant changes to your personal situation, please contact us so we can relook at your plan and adjust accordingly. We do not want to make emotional decisions in reaction to the news, markets, or presidential elections. However, we will make changes as your goals and life situations change.
In conclusion, as we consider where we are as a nation and look to the future, none of us knows what today or tomorrow holds. But we do know WHO holds our future – Jesus Christ. As we look at the past, we can gain helpful perspective. We don’t know who is going to be elected, what the market is going to do, or if there will be a spike in COVID 19 cases this fall. We can take courage and comfort in the words of Jesus from John 14:27 “I am leaving you with a gift—peace of mind and heart. And the peace I give is a gift the world cannot give. So don’t be troubled or afraid.” (NLT)