On the night of November 8th, 2016, the US stock market was digesting the biggest Presidential election upset of our time. Late in the evening it was becoming apparent that Donald Trump would indeed defeat Hillary Clinton, and S&P 500 futures markets were plunging. At one point they were down nearly 5%.

Paul Krugman sought to answer the question of “when will markets recover from President Trump?” that evening in a piece for the New York Times. He wrote:

“Still, I guess people want an answer: If the question is when markets will recover, a first-pass answer is never.”

Not only was Krugman wrong. He was wrong quite quickly.

Krugman wrote his piece near the overnight market lows and by the close of business the following day not only had US equity markets fully recovered from the entire overnight decline, but they also gained about 1% on top of that.

What else stands out about the S&P 500 chart shown above? I notice that the S&P 500 is around 2,105 in the chart. As I write this not even 8 years later, it is now at 5,660, and that does not even count the dividends paid along the way. Markets did not share the sentiment of Mr. Krugman.

Don't React

By the time you could have emailed or called your financial advisor the following day to liquidate your portfolio, markets had probably already recovered.

I don’t bring up this example in defense of former President Trump. I have no public opinion on who should or should not be President, or whether or not their particular policies had an influence on equity prices.

November 8, 2016 is a classic example of how reacting to news and current events is setting one up to fail as an investor and how listening to seemingly very intelligent people (like Paul Krugman) can be a terrible idea.

A casual reader of the NYT might think Paul Krugman is worth listening to over Mark Meredith. He graduated summa cum laude from Yale (which is just slightly more prestigious than Eastern Illinois University), received a Nobel Laureate in economics, and is a former professor at MIT, Yale, Stanford, Princeton, and the London School of Economics.

Paul Krugman is certainly smarter than me, but he was ignorant of his ability to predict the future (which was previously validated by his prediction that the internet would have no greater impact than the fax machine). I accept my limitations in that regard.

The Election

Leading up to the 2016 election I heard everything from investors. There were those who thought their portfolios would be doomed under Trump, doomed under Clinton, or doomed no matter who won.

Many had similar concerns leading up to the 2020 election. Guess what? The end of the world was once again postponed. I even wrote an article in September of 2020 which you can find here, suggesting people shouldn't sell their stocks before the election.

In the last 10 days we saw the former President nearly assassinated, and the current President drop out of his reelection campaign. If 2020 wasn’t wild enough for you, maybe 2024 can top it.

What changes should you make to your portfolio because of this? Probably none.

“Don’t do something, just stand there!” -John Bogle

If one is making investment decisions based on current events, gut feelings, or far-fetched predictions, I am nearly certain they will experience subpar lifetime investment returns as they are simply relying on luck.

Relying on shear luck might be a good for a sheep farmer, but not an investor.

While some may think we are doomed no matter who wins an election, my approach is often the opposite.

I am optimistic investing in businesses no matter who is President. History is on my side. There will be bad market environments under nearly every President, but they are only temporary.

If you don’t like the regime in charge, you will likely blame that regime for the poor temporary returns. If you do like the regime in charge, you may perform some mental gymnastics to blame the other side.

The people running the publicly traded companies of the world are on a mission to constantly grow revenues and earnings per share for their investors. They are doing the hard work, while all we have to do is stay the course to ensure we get our fair share of returns.

The Trend

There is actually a trend to pay attention to when it comes to investment returns and who is running the country. The trend is a lot of positive results no matter who has been in charge.

Investing is not a puzzle that needs to be solved, but a discipline that needs to be practiced.

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This article is for informational purposes only and is not a recommendation of Meredith Wealth Planning or Mark Meredith, CFP®. Past performance may not be indicative of future results and may have been impacted by events and economic conditions that will not prevail in the future. Therefore, it should not be assumed that future performance of any specific security, investment product or investment strategy referenced in the Article, either directly or indirectly, will be profitable or equal to the corresponding indicated performance level(s). No portion of the Article shall be construed as a solicitation to buy or sell any specific security or investment product or to engage in any particular investment strategy. Any reference to a market index is included for illustrative purposes only, as it is not possible to directly invest in an index. Indices are unmanaged, hypothetical vehicles that serve as market indicators and do not account for the deduction of management fees or transaction costs generally associated with investable products, which otherwise have the effect of reducing the performance of an actual investment portfolio.

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