Your Weekly Market Update - August 7

By Ryan Gilmer, CFA, CMT Chief Investment Officer

August 7, 2020

This week, the S&P 500 trended higher, continuing the positive momentum which has consistently persisted since March 23rd.
So far this year, we’ve seen a continuous array of emotional and divisive events, and plenty of volatility in financial markets. Another such event is coming: the November elections. Democratic nominee Joe Biden is expected to announce his pick for Vice President next week, and investors will be paying attention to both his run against President Trump as well as the outcome of Congressional races.

We are starting to receive more questions from clients regarding how these political events will affect their investment accounts. The graph below, from Charles Schwab, shows how an investment of $10,000 on January 1st, 1961, would have grown under three different scenarios:

  • Investing only under a Republican president
  • Investing only under a Democratic president
  • Staying invested the whole time, regardless of who is president

As you can see from the chart, the results are staggering and the conclusion is obvious – opportunity exists for those who stay the course. Here are some additional observations:

  • Leadership is important – We recognize the importance of leadership and good governance. Politics are important because they can have a significant impact on our society. We encourage and commend you for having thoughtful, committed political views.
  • There are many factors – Economic and corporate earnings growth are the primary factors that drive stocks higher over time. While government and politics can affect the economy, it’s a smaller influence than businesses innovating and creating new products. Individuals are also motivated to work and improve their standards of living. These forces have a more essential impact on stocks than the current party in power.
  • We’ve seen setbacks – In our experience, investors occasionally allow their political views to negatively impact their investment performance. When a client chooses to abandon their investment plan because the opposing party is in power, they miss out on future returns.
  • We’ll always listen – We are available to discuss your political concerns and how they relate to your financial situation. An open conversation can help you navigate the present environment and work to achieve positive investment results.

We look forward to speaking with you soon!

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