Stephen: With the 2024 presidential elections fast approaching, we know many of you have concerns about how the outcome might impact your portfolio. So stay tuned because that’s what we’re talking about here on this episode of the Smart Money Show. Welcome back and thanks for tuning in to another episode of the smart money show I’m your host Stephen Rischall and today I’m joined by my co-host Matt Stadelman let’s dive right in

Matt: Thanks Stephen you know in the past I’ve volunteered to tackle this topic all by myself topical politics at this time I’m glad we’re going through it.

Stephen: Absolutely Matt, so let’s start by addressing a common concern I think many people believe that the performance of the stock market and the economy is heavily influenced by which parties in power, but the data tells a very different story.

Matt: Sure, so this is a survey from Pew Research Center which shows how Americans feel about economic conditions based on their political affiliation, and it’s probably not a surprise Republicans tend to feel better about markets under a Republican president, and Democrats feel better under a Democratic president.

Stephen: You know what else is interesting Matt, the S&P 500 the annualized return during the past three presidents have been very similar so under Obama trump and now Biden so under Obama his eight years averaged 14 almost 14.5%, Trump’s four years came in at about 16% and Biden, with about you know 5-6 months left, he’s at about 13% annualized or I should say the markets’ annualized returns. All of these figures by the way are a lot higher than the long-term average of the S&P 500 which is closer to about 9% or so.

Matt: That’s a good point, and here’s another. This next chart shows GDP growth on top and S&P 500 performance on the bottom. Now most often we have a divided government which has produced 2.7% annualized real GDP growth since World War II and 7.9% annualized returns on the S&P 500. It also shows when Democrats and Republicans had full control. When that happened GDP was a little higher when Democrats have full control, but stocks have performed a little bit better when Republicans had control.

Stephen: So basically, Matt what I got from that chart is economic conditions are more the same than they are different over all these time periods and clearly it actually has little to do with which political party is in charge. But hey, we’re human, so unlike the stock market we have emotions and I’ve said this before that emotions and money they don’t really mix that well.

Matt: Yeah and we definitely see how emotions and politics can get in the way of smart financial decision making. One thing we talked about earlier this year at our client event was volatility. Because of human emotions we sort of anticipate that there’ll be more volatility in markets during election years. But that’s not something you should base your long term investing, long term financial decision on.

Stephen: Financial markets have shown resilience through four year presidential cycles, and while there may be some more volatility typically leading up to an election historically there’s been more years, as we can see on this chart, with positive returns the year before and the year of a presidential election compared to post-election and midterm years and that’s a little bit interesting.

Matt: It surprises me a little, but you know, the numbers, they don’t lie and like we’ve been discussing changes in political party control in the White House and Congress have little impact on long term market performance. The best way to illustrate this is to look at how the S&P has performed over the long run.

Stephen: Right, and we’ve got a chart for that. So on this chart we can see the growth of $1,000 invested in the S&P 500 back in 1928. The blue and the red represent the political party of the president over these time periods and it’s pretty clear that over time the market continues to grow regardless of who the president is and how much we like or dislike that person.

Matt: Stephen, does that graph show $9.5 million?

Stephen: Yes, that’s correct. $1,000 invested almost 100 years ago would be worth more than $9.4 almost $9.5 million today. Once again, this is a shining example of how time in the market, not timing the market, can really pay off for investors. So, Matt, what should investors keep in mind during these politically charged times?

Matt: Well I think, at Navalign, we want you to focus on the bigger picture. Long term investment goals should not be swayed by short term political events.  It’s the broader economic trends that have the more significant impact on market performance

Stephen: Exactly and as we wrap this up let’s remember that while elections bring uncertainty the markets have a history of adapting and moving forward. So you know like Matt said that key take away, stay focused on your long term goals and don’t let political emotions drive your financial decisions.

Thanks again for tuning in. If you found this video helpful please like share and comment below and if you have any concerns about your portfolio or your financial plan now is a great time to reach out to us and schedule a review meeting with your advisor. Until next time, I’m Stephen Rischall, that’s Matt Stadelman, and this is the Smart Money Show.