It’s an Election Year!

with No Comments

2016 election and markets

The influence of elections on markets, investors, and economies has been examined and re-examined over time. Theories have been developed. Ideas have been promoted. Some may be accurate; some may not be. Here are a few things to keep in mind especially if markets get volatile before the election:

  • Stock markets don’t care who is elected: You may have read markets perform best when Democrats win, or you may have read markets outperform when Republicans are elected. The numbers just don’t prove out either way, according to a white paper from BlackRock:

“…while many investors connect political alignment with equity market returns, very few of these patterns hold up to scrutiny. Historically, whether a Republican or Democrat occupies the White House has had no statistically significant impact on U.S. equity markets.”

  • Change tends to happen slowly, especially with divided government: We’ve all become familiar with the term, ‘gridlock.’ There are issues – taxes, immigration, energy – that have been debated for years. In general, policy changes have been relatively small. Sometimes, changes have been reversed. Morgan Stanley concluded, “Hence, election outcomes where one party controls both the White House and Congress are most conducive to expeditiously putting transformative policies into practice.”
  • The strength of the economy influences voters. According to Oppenheimer Funds:

“Decades of history prove that the state of the economy determines the president, not the other way around. In fact, the economy’s impact on elections can be stated in a fairly simple equation: Strong economy (declining [un]employment and inflation) = a win for the incumbent party candidate.”

If that’s the case, it will be pretty difficult to guess a likely winner. A Gallup poll found just as many Americans viewed the economy positively as those who viewed it negatively in early September. On the other hand, more Americans said the economy was getting worse than those who thought it was getting better.

Weekly Focus – Think About It

“We in Britain stopped evolving gastronomically with the advent of the pie. Everything beyond that seemed like a brave, frightening new world. We knew the French were up to something across the Channel, but we didn’t want anything to do with it.”

– John Oliver, British comedian

Sources:

  • https://www.blackrock.com/investing/literature/whitepaper/political-outlook-market-perspectives-january-2016.pdf?cid=blog:marketperspectives:blackrockblog:russ
  • https://www.morganstanleyfa.com/public/projectfiles/onthemarkets.pdf
  • https://www.oppenheimerfunds.com/investors/article/what-investors-need-to-know-about-the-2016-election/sixtruths-about-washington-regardless-of-who-wins
  • http://www.gallup.com/poll/195689/economic-confidence-index-stable.aspx?g_source=ECONOMY&g_medium=topic&g_campaign=tiles
  • http://www.brainyquote.com/quotes/quotes/j/johnoliver579176.html

Disclaimer

*These views should not be construed as investment advice. * The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. You cannot invest directly in this index. * The Standard & Poor’s 500 (S&P 500) is an unmanaged index. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment. * The Dow Jones Global ex-U.S. Index covers approximately 95% of the market capitalization of the 45 developed and emerging countries included in the Index. * The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market. * Gold represents the afternoon gold price as reported by the London Bullion Market Association. The gold price is set twice daily by the London Gold Fixing Company at 10:30 and 15:00 and is expressed in U.S. dollars per fine troy ounce. * The Bloomberg Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998. * The DJ Equity All REIT Total Return Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones. * Yahoo! Finance is the source for any reference to the performance of an index between two specific periods. * This newsletter was prepared in whole or in part by Peak Advisor Alliance. Peak Advisor Alliance is not affiliated with Skygate Financial Group. * Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance. * Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful. * Past performance does not guarantee future results. Investing involves risk, including loss of principal. * You cannot invest directly in an index. * Consult your financial professional before making any investment decision. * Stock investing involves risk including loss of principal.