Culture and Values, Market Values, Optimism.
Let us help you find the signal in the noise and invest with optimism. We have immense conviction that a disciplined approach to investing in good assets at reasonable prices will produce a bright future of attractive returns over the long run. Though economic and market cycles are as sure to repeat as the rising and setting sun, we have supreme confidence in the creative and innovative human spirit, and our collective ability to find new ways to break through and achieve great progress.
Every few years, we find ourselves inundated by presidential election-related news, noise, and campaign ads. It can be a deafening drumbeat of scare tactics, exaggerations, and unattainable promises, all aimed at swaying voters one way or another. In the last presidential election cycle (2019-2020), the Federal Election Committee reported that presidential campaigns spent $4.1 billion, party committees spent another $3.0 billion and Political Action Committees (PACs) spent $12.9 billion. That’s a whopping $20.0 billion in total. We suspect a much larger amount will be spent during the current election cycle.
Looking beyond the noise and exorbitant spending, what may be on investors’ minds - however they choose to vote - are the ramifications on near-term investment returns. The short answer is: NOTHING! Looking back at the past 11 presidential election cycles since 1980, the stock market was down in only two election years. Those years were 2000 and 2008, and the cause of the decline had little-to-nothing to do with the elections or who won. In 2000, the main factor impacting the market was the dot-com/growth stock bubble that burst in March of 2000 and carried the market lower through 2003, resulting in the market declining 9% in 2000 and falling a total of 38% through 2003. And during the 2008 election cycle, the Great Financial Crisis had already begun to play out and carried the market lower through early 2009. The result was a 37% decline in equities in 2008 and a less severe 8% decline through 2010 as the equity markets bottomed in 2009. To be sure, these were painful periods in the equity markets, but long-term investors with appropriate asset allocation to fit their risk profile and liquidity needs managed through it just fine.
Absent of these two election year “shocks,” the average gain in the stock market during an election year was 16%, and the average annualized three-year return was 14%, as shown in accompanying chart. And in all these years, the market was positive on both a one-year and three-year basis.
At the Tschetter Group, our approach to managing our clients’ investments remains consistent this year, as it has in previous years: We prioritize building financial wealth by owning good businesses and real estate, taking care to pay a fair price for each along the way. Our focus remains steadfast on long-term results, managing risk through strategic asset allocation, and looking beyond the “noise.”
We’re in it together for the long haul, allies who help navigate change, anticipate challenges, alleviate fear, and instill a sense of confidence about the future.
With Optimism,
Peter Jacobs, CFA, CFP, SENIOR PORTFOLIO MANAGER
Nathan Mumford, CFA, RESEARCH ANALYST
