Election Anxiety and Investing Part Two: The More Things Change, the More They Stay the Same

“With every new wave of optimism or pessimism, we are ready to abandon history and time-tested principles, but we cling tenaciously and unquestioningly to our prejudices.” 

― Benjamin Graham, the Father of Value Investing

There’s no getting around the fact that, in many ways, this has been a highly unusual presidential election season.

We have one candidate who, three months ago, wasn’t the candidate. Surprise! We have another candidate who won an election, lost an election, contested that election in the most strident way possible, and is now running for reelection. 

Sigh. Elections can make investors nervous, especially presidential ones. And this election may be making investors more nervous than usual. If it feels like there’s more uncertainty than ever surrounding, well, just about everything, join the club. You’re not the only one.

But there’s one thing you can be absolutely certain of: Either a Republican or a Democrat will be elected president next month. And the data irrefutably shows that, going back as far as the 1920s, stocks have marched steadily upward, no matter which party occupies the White House.

Here’s a webpage that lays out said irrefutable data, in a wonderfully intuitive visual format. Good investors know, of course, that past performance does not guarantee future results. They know this because it has been steadily drummed into their heads by the investing industry every time they glance at a prospectus. It’s fair play to declare this, as it’s completely true. 

Still, you don’t often get a more clear-cut picture of an important financial trend than the one laid out above, i.e., stocks do equally well over the long-term regardless of party. So we’re faced with our rational side telling us one thing, and our reactive side telling us another. 

I’ll refer you to the quote above at this point, from the inimitable Benjamin Graham. My takeaways are: Pay attention to investing history. To the data. To the clearly demonstrated fact that it has never mattered which party wins the White House when it comes to the stock market.

Pay attention to the time-tested principles that got you here. To the analytical and empirical approach that has served you so well thus far. And, by all means, abandon your prejudices, your fears, because they’ll only steer you in the wrong direction. They’ll only hold you back.It’s normal to get nervous in times of governmental change. But when those moments of anxiety pop up, as they are sure to in the coming days, we being human after all, make the effort to engage your rational side and disengage your reactive side, even if it’s not that easy.

We wrote a few months back that “shareholders invest in companies, not political parties.” That “companies focus on serving their customers and helping their businesses grow, regardless of who is in the White House.” We feel that was good advice then and equally good advice now.