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What to Make of the "Election Uncertainty" Talk?

Updated: Oct 22, 2021

To be absolutely certain about something, one must know everything or nothing about it.” – Henry Kissinger

I can't go one day without reading or hearing about the "uncertainty of the 2020 presidential election." The information often reveals the political tilt of the source or person delivering the message. A right leaning publication will tell you how the Democratic nominee is going to crash the market. My left leaning neighbor tells me she moved all of her investments to cash because Trump is a "loose cannon."

Bigger picture, I wonder if there's ever been a point in history when there wasn't market uncertainty. Let me know when I can pound the table and say, "all systems go... no market risk to worry about here."

You might be shocked to hear this, or may even disagree; but election outcomes, past and present, should have zero impact on how investment decisions are made. Would you really want your liberal/conservative money manager making decisions based on their political biases? Of course not. You shouldn't either.

Sure, debate the merits of each candidate. Passionately campaign for your candidate of choice. You can even predict who you think will win the election. Fair elections and the freedom to vote without consequence make our country great.

The trouble lies with proclaiming who will win and what happens next...

"If President Trump is reelected then A, B, and C is going to happen!"

"If Elizabeth Warren is elected the economy is going to crash!"

These bold statements are littered with emotion that can bleed into your investment portfolio and personal finances.

The 2016 election was a perfect example. Virtually every political analyst, talking-head, observer, columnist, thought Trump had zero shot to be the Republican nominee for president. Then they said, there was no chance Trump could beat Hillary Clinton in the presidential race.

We were bombarded with headline after headline of what would happen next if Trump were to be elected president...

CNN: "If Donald Trump wins the election, U.S. stocks (and likely many other markets overseas) will almost certainly tank."

Marketwatch: "The stock market could crash if Donald Trump is elected president."

Politico: "A Trump win would tank the markets."

I pulled a few gems from the above articles:

"The answer, unfortunately, is that growth and employment around the world look fragile. A big adverse surprise — like the election of Donald Trump in the U.S. — would likely cause the stock market DJIA (Dow Jones) to crash and plunge the world into recession."

The next quote is actually an investment advisor going on the record. Unbelievable stuff...

I always assumed Trump would eventually collapse so that meant staying in equities and going away from certain high-dividend stocks assuming Clinton is going to win and try and tax those dividends at a higher rate,” he said. “And I watched all the WikiLeaks and they are positive from an investment perspective especially for bank stocks because it looks like her moves left were more in response to Bernie Sanders rather than her actual beliefs.

I had to read the above quote five or six times. Sounds more like tarot card reading than expert investment advice.

I'm seeing the same garbage pop up this election cycle.

Washington Post: "Wall Street Giants Claim Warren or Sanders Would Crash Stock Market."

CNN: "What Would an Elizabeth Warren Presidency Mean for the Economy and Markets?"

For kicks, let's say you knew the results for the 2016 election ahead of time. Trump was going to be the next president of the United States. What would you have done from an investment standpoint? Probably everything wrong if you were reading what all the experts were saying.

Even if we can predict the outcome of some event, it doesn't mean the market is going to act the way you think it should. The market doesn't care if you're liberal or conservative. It doesn't care that you dislike Trump, Clinton, Warren, Sanders, etc. Elections, past or present, are not a reason to get more conservative or aggressive with your investment portfolio. History has shown that investing and politics are a toxic combination.

For the record, I'm not saying to tune out the election vortex. I know some people who enjoy the strategy and drama of politics (my late grandfather comes to mind). Just be mindful of it seeping over into your financial affairs. Politics and investing do not mix.

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