October Mid-Month Update

By Ryan Gilmer, CFA, CMT Chief Investment Officer

October 16, 2020

We hope you are doing well. Here is a recap of market performance for the month of October and year-to-date:

In our September Market Update, we discussed the recent correction in the stock market that started on September 2nd and concluded, to this point, on September 24th. Stocks rallied at the end of September and have continued going up to begin October, with US small company stocks leading the way. US large cap stocks and international are also up to a lesser degree, while bonds have been relatively unchanged. The S&P 500 remains the leader for the year so far with regard to stock investments. Bonds are also firmly positive.

You’ve likely noticed that election season is here, along with the ramped up emotional rhetoric. Politics and elections are important – they help decide the policies and laws that govern our society. A motivated and educated electorate is certainly a good thing.

When it comes to investing, though, the inhabitant of 1600 Pennsylvania Avenue is not the main determinant of stock market returns. The following graph, from the Charles Schwab Quarterly Chartbook, takes a look at the growth of $1 invested over the last 11 presidents:

The graph shows eight different regimes – four Democratic and four Republican. As you can see, the stock market was higher overall by the end of each for 7 of the 8. The only exception was George W. Bush and in his case, he inherited a stock market averaging returns of over 17% annually during the 1980s and 1990s – well above the historical average. Much of what happens in the markets, both good and bad, is out of the president’s control.

So, regardless of who wins the upcoming election, we should probably expect stocks to be higher after that person eventually transfers power to the next president. Please reach out to us if you would like to discuss this process or your accounts in further detail.

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