Bulls, Bears, Donkeys, and Elephants: Politics & The Market
It is not uncommon to hear politicians and those discussing politics bring up economics. As financially-centric conversations can make up a significant portion of political discourse, it is not uncommon to hear discussions of the stock market’s long-term successes and failures being attributed to certain political parties, leaders, individuals or events. The true fact of the matter is that politics rarely makes a significant impact on the long-term health of the market and the party or individual in power rarely has a recognizable influence on the market trends.
See the Morningstar Andex Chart below and note the political leaders/parties who had control in the United States and Canada. None of the tracked metrics are heavily influenced by left-wing or right-wing parties being in control or specific leaders.
During times of serious uncertainty, it is possible that a small effect on the market can be noted but this effect is often cycled out and, at most, can be recognized as a period of short-term volatility (which means opportunity, see here). When the United Kingdom voted to exit the EU during Brexit, there was a global market tremor. Within the next week or two, the markets rebounded with indexes in America reaching all-time highs.
All this is not to say that there are not events that can impact things on the market. If in an unfortunate coincidence, a series of events compounded to have multiple negative impacts on the market in succession, it could absolutely create a more detrimental impact on the market. As long as your advisor is ensuring your portfolio is well-diversified, you should easily avoid any serious implications in the aforementioned hypothetical situation.
Specific policies on taxation, trade, or regulation have a greater chance of influencing the stock market as they tend to have more significance to the growth of individual companies. As with the 2016 election, certain stock prices can be impacted by the public anticipating certain policies that will have a noticeable effect on profitability. Much of this impact is based on speculation and, like other market crazes, fizzles out or does not have any lasting effect on the market.
Having a diversified portfolio that is managed well means having an advisor that is both aware of the day-to-day trends but does not let them sway their big picture perspective. Long-term gains are what investing is all about. At the Ramberran Wealth Group, your portfolio will not only be protected from the politically-centric short-term volatility, but it may even capitalize on it to ensure the best case scenario for you and your future.
