With the election just around the corner, I thought it timely to focus this blog on a Common Investment Mistake of Using Politics to Make Investment Decisions.
Party Doesn't Determine Price
The thing to keep in mind during any election is that regardless of the person in the White House, the prices of the great companies of America are not typically affected. The chart below demonstrates this truth and shows the price of the S&P 500 along with the party in power throughout the last 70+ years.
from Nick Murray Interactive, August 2024
How the Markets Behave Around Elections
Historically, there is usually some disturbance in the markets right before elections because the markets do not like uncertainty. They tend to recover and climb after the elections are over. The prices stabilize and go up, regardless of who wins. The uncertainty is gone!
You see, the highly compensated managers and directors of the largest, most profitable, best managed, and most innovative companies that make up the S&P 500 are continuously working on protecting themselves from - or even taking advantage of - whichever way the political winds are blowing.
Don't Just Take My Word For It!
In a 2017 interview with CNBC, Warren Buffett rebuffed the notion of blending investing and politics. Here’s a link to the interview if you’d like to hear more of what Buffett says on this mistake:
Warren Buffet: Don't Mix Politics With Your Investments Decision | Squawk Box | CNBC
I agree with Warren Buffet. “If you mix your politics with your investment decisions, you’re making a big mistake.”
We are just a phone call away if you have any questions about the election and how it might impact your financial plan.
Previously Covered Common Investment Mistakes:
Common Investment Mistakes: Investing for Yield
Common Investment Mistakes: Panic
Common Investment Mistakes: Overconfidence and Speculation Trading