With a few weeks to go until election day, and voting already underway, it is increasingly difficult to take a breath without hearing something election related. Many pundits are forecasting a wild ride in the markets through this election season, but it is important not to get caught in the hype and to focus instead on facts. The bottom line is that the market reacts most to surprises, and the election is a scheduled event!
The quantity of charts, diagrams, and graphics that I’ve recently reviewed on this topic is a little mind-boggling. One study with data dating back to the 1860’s (yes, 160 years of financial data) shows average returns being 0.7% higher in election years versus non-election years. Another study with data back to 1964 shows volatility for the 6 months before and after an election as being statically the same, on average, and that this volatility was less, on average, than non-election year volatility.
The summary to this data is simple; stay the course and allow the ‘noise’ of current events to fade into the background. Still, there is a lot going on these days and if you are concerned at all, please call anytime so we can talk through whatever might be top of mind for you.
Speaking of Markets…What Gives?
The relatively positive performance of global stock markets in the last few months has had many observers scratching their head asking how the market is doing so relatively well with unemployment rising and businesses scaling back. Although there is no clear answer, there are a few possible reasons.
The first is simple, there are some losers out there (how many airplanes have you been on this year?) but there are also winners. Consumers may be spending less money, and that does hurt the economy, but they are still spending. As the winners and losers continue to be sorted out, we do see that many companies and industries are doing fine, some even well. (Have you ever seen your local home improvement store so busy?) The data show that stimulus money has done its job in keeping consumers spending during the pandemic.
Second, the market is generally thought of as a predictor and not always terribly reflective of the ‘here and now’. Because of this, many believe the market is predicting an improvement in economic conditions. Why? Likely because COVID-19 testing capacity and positive patient outcomes are both increasing, which allows businesses to safely experience a relatively return to “normalcy” despite the continuing pandemic. For example, several US airlines and airports are working to develop rapid testing at the airport to screen passengers before they board a flight. Obviously, this will need to be tested and reviewed, but this is a huge step toward returning to “normal” operations for the travel industry. Increased availability of testing and rapid results has also allowed sports to return to competition and some countries to re-open their borders.
An Update on Passport Wealth Management
With everything going on in the world, you can imagine that journalists are looking for comments from the industry. Some of these reporters have found their way to me. You can always read our press coverage on the website. And last, but certainly not least, Passport Wealth Management continues to grow! I hope you’ll join me in welcoming Corné Botha to the team as our Client Services Specialist.
Live Long and Prosper,
Dan Tobias, CFP®
Please note: The above is a copy of the 2020 Q3 Passport Wealth Management client newsletter attached to quarterly statements from November 2020. The newsletter is published to the website for informational purposes only and is not financial or investment advice. You should consult a CERTIFIED FINANCIAL PLANNER™ Professional for financial advice.
Past performance may not be indicative of future results. Indexes are not available for direct investment. Investing involves risks, including the potential for loss of principal. There is no guarantee that markets will act as they have in the past or that any investment plan or strategy will be successful.
Daniel Tobias is a CERTIFIED FINANCIAL PLANNER Professional and a Fee-Only Advisor. He owns Passport Wealth Management, a financial advising firm based in Cornelius, NC that works with clients across the globe. He helps individuals plan for retirement, manage investment portfolios, mitigate taxes, and secure their financial futures. With more than 10 years in the industry, Daniel has spoken nationally on financial planning practice management and has served on the National Association Personal Financial Advisors (NAPFA) South Regional Board. He resides with his family near Lake Norman in North Carolina where he enjoys mountain biking, hiking and travel.