DOLLAR$ & SENSE: History shows that markets won’t care if Hillary or Donald wins

BY CHRIS HANLY

Investment Consultant, Gary Goldberg Financial Services

Politicians, on both sides of the isle, have become masterful at pulling heartstrings and playing on voter’s emotions. Of course, these same voters are also investors and are therefore very conflicted and concerned over the outcome of
the upcoming Presidential elections and how the results might impact the economy, the markets, and their investments. These legitimate concerns are reinforced and compounded by what psychologists call “confirmation bias,” a process by which an individual only seeks out information that reinforces their worldview. Not helping the matter is that both Hillary Clinton and Donald Trump have the lowest approval ratings of any Presidential candidate in history, making emotions run even hotter.

But this isn’t the first time in history that unpopular individuals have been elected President. Case in point, since 1945 when Harry Truman took office, the three Presidents with the lowest approval ratings were Presidents Truman, Carter and Ford – all of whom had approval rating below 50 percent during their tenure. However, the market (as measured by the S&P 500) fared well during these administrations. As a matter of fact, during the above mentioned administrations, the S&P 500 had an annualized return of 11.23 percent, a return significantly greater than the average annualized return of 8.22 percent from 1945 through 2012.

There is no doubt that the outcome of elections will have an impact on our economy, but there are many other factors that influence our and the world’s economies much more than who occupies The Whitehouse. Congressional control will certainly matter, monetary policy (the Fed) will have an even greater influence, and global growth – 84 percent of which comes from outside The United States – will have the greatest impact. This means that investors are smart to focus on what really matters and set emotions aside. Critical to success is having a consistent and disciplined investment process, such as our proprietary Montebello Process®, to ensure that our investment decisions stay consistent and that our portfolio adjustments are based on facts and events as opposed to feelings and emotions.

Based on the current environment, and the fact that the market “recovery” is now in its 85^thmonth (compared to the average recovery which lasts just 39 months), caution is certainly warranted. We are in an unprecedented environment of ultra-low interest rates, moderate economic growth, and an absence of inflation (at least overall inflation) – meaning that the current bull market could easily continue. However, having a tactical overlay of high-quality dividend paying stocks in your portfolio is probably a wise strategy as it will help alert you to a shift in market sentiment and direction. Moreover, being diligent in your research and focusing on company’s balance sheets, growth prospects, and overall financial health is also paramount to success. If you’d like more information on our approach to investing, don’t hesitate to call or email me.

Chris Hanly is an investment consultant with Gary Goldberg Financial Services in Suffern and can be reached at 845-368-2907 or[email protected].