During my entire 47 year career every four years the question of what party controls the White House will do to market returns comes up. Surprisingly, the answer is that it doesn’t much seem to matter. Markets have behaved without any clear relationship between party in power and subsequent performance.
And for those that maintained that tax policy is a key to performance we find similar ambiguity. The world and the economy are far too complex to be driven by such simple factors. So, to the extent that the person behind the Resolute Desk influences tax policy, it hasn’t moved markets. And markets have often defied the prevailing wisdom.
The talking heads and “experts” are simply no help. Everybody has an opinion to which they are entitled. But, just like in politics you are not entitled to make up facts. And the facts are clear, elections don’t much predict financial performance.
Please see the slides showing the impact of party in power compared to subsequent performance. As you can clearly see the results are a toss-up. So, even if we know in advance who will prevail in November, it’s not any help in forming a rational investment policy.
Frankly, the present pandemic will rule the global economy until it ultimately runs its course and/or is contained. And there is no indication that it cares who occupies 1600 Pennsylvania. But, that’s one critical area where public policy matters to markets. When public health is restored, the economy will follow.
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