All About Change

Election time is upon us again.  Robo calls and junk mail.  Screaming TV ads and spam emails.  Texts from every agency and candidate under the sun.  Oh boy!

And, of course, there are all those headlines about the ruins that’ll befall your savings, the country, and the world as a whole if the ‘other guys’ win! 

A long time ago I began to wonder if Halloween and Election Day are so close to each other to scare people of all ages. Much like how the haunted houses and mummies aren’t actually going to devour your soul, the ‘other party’ isn’t likely to inflict mortal wounds on your portfolio.

While we all have our preferences for who we would like to represent us as a nation, overwhelming evidence exists that the winning party doesn’t mean much to the financial markets.  This is true in general election cycles, and only more so regarding the mid-terms.

Historical data spanning 1937 to the present from Hartford Funds illustrate that the stock market has consistently performed well after midterms regardless of political configurations.

In their publication, “How Political Parties in Power Influence Markets,” the data tracks the 12-month average returns of the S&P 500 Index following presidential or midterm elections to reveal the following:

Summary of Market Returns by Government Alignment (1937–Present)

The core conclusion of this analysis is that markets typically do well post elections regardless of who wins.  If not much else, election results clear some level of uncertainty, and uncertainly is something markets patently do not like. 

The DC Soap Opera may be both entertaining and irritating, but long-term market performance is driven significantly more by corporate earnings, economic growth, and monetary policy than by which political party holds power in Washington.

That table from Hartford could inspire additional confidence for the markets ahead since the conventional opinion is that Democrats will win enough seats to divide the government.  The majority party ceding some control in midterms is a common outcome, so at least some degree of change is likely on the horizon.  Markets tend to thrive on the limited policy changes that come along with the compromising that must happen in DC during those divided periods. 

This all means there’s rarely any reason to make investment decisions based on election outcomes, not immediately anyway.  As investors, we need to always monitor broader economic conditions, and politicians and their policies will undoubtedly have an impact.  This impact, however, is usually grossly overestimated for various reasons.  Not the least of which is that campaign promises are easier to make than implement, but also that market forces and business innovation have a habit of outweighing political stances.

The bottom line is that change is likely coming as it usually does after midterms.  Even in uncommon situations where a party maintains their majority, there are always inevitable shifts in agendas as campaigning ends and a President enters his final two years in office.  Whether your party wins or loses a month from now, the change we’ll see is likely to have limited impact; but whatever impact it does have will more than likely be viewed as a positive.

On the topic of change, after writing Worth Considering for nearly 16 years, I’ve decided it’s time to make some changes to its format.  My goal has always been to make this piece as useful as possible within the confines of the financial industry’s rigid compliance rules.  Since a communication outlet like Worth Considering is read by more than one person, and those reading it may be in completely different financial circumstances, I’m not able to drill into many specific investment themes without running afoul of various compliance rules.  Over the decades, as these rules have only gotten more stringent, a lot has also changed in the way we consume information.  So, a little evolution is rightly in order.

Going forward, I plan to place greater emphasis on charts, graphs, data tables and visual representations of the issues being addressed, while using written commentary more selectively to provide context, interpretation and perspective where it may be needed. 

This does not mean that commentary will disappear.  Rather, I want the written portion to be more focused and purposeful – helping explain what the data means, why it matters, and what I believe is worth paying attention to. 

My goal is to make this more concise, more visual, and easier to digest while continuing to provide the thoughtful perspective that has been its purpose for the past two decades. 

While this is an evolution of the format, it is not a change in the underlying objective.   I remain committed to providing information and insight that is relevant, useful and worthy of your time. 

To that end, industry compliance nuances may actually allow future iterations of Worth Considering to expand on its mission by allowing the occasional deeper analysis of various financial planning concepts and investment strategies.  To the extent these caveats allow, I hope to be able to highlight and analyze more strategic financial planning and estate maximization concepts and go beyond just broad economic and investment overviews.  After all, we’ve all grown portfolios for a reason.  Whether it is to enjoy a comfortable retirement, provide for the next generation, or both, it’d be a sin to have a disorganized plan that underserves all the time and effort it took to grow those assets.

I’d also like to expand discussions into areas that fall into the financial planning field from somewhat different perspectives.  Topics like health, longevity, philanthropy, generational gifting, and travel all have their place under this tent and its possible Worth Considering can also be used to touch on these issues. 

It’s even possible that future versions may be able to allow for live speakers and interactive webinars.  We shall see.  But for the time being I wanted to let you know that this letter will be getting various refreshes in the editions to come.

Helping me navigate all of these things will be our team’s new partner, John Miller.

I introduced John in the last edition, but I wanted to conclude this edition of Worth Considering by letting you know this will be the last that comes under the masthead of Winn Partners Financial Group.  That’s because Winn Miller Wealth Management has now been formally established!

Although John and my team have worked closely for nearly two years, Shelby, Kristina, and I are thrilled to formally welcome him as a Partner.  John’s two decades of advisory experience brings a depth of knowledge to our collective table.  I look forward to working alongside him for many years to come!

The Takeaways:

• Double-down on your spam blockers until midterms pass.  And when they are behind us, don’t expect much to have changed as a result.  Neither about how DC operates nor about the outlook ahead for the economy and financial markets.

• The ‘new look’ Worth Considering of the future will lean less on commentary and more on succinct charts and graphs to help convey key concepts I’d like to be sure you’re aware of.  It will also have the new masthead of Winn Miller Wealth Management.

• Welcome John! 

Disclosure

Securities offered through International Assets Advisory, LLC (“IAA”) – Member FINRA/SIPC. Advisory services offered through International Assets Investment Management, LLC (“IAIM”) or Global Assets Advisory LLC (“GAA”) – SEC Registered Investment Advisor(s). IAA, IAIM, and GAA are affiliated entities.

The information provided is based on carefully selected sources, believed to be reliable, but whose accuracy or completeness cannot be guaranteed. Any opinion herein reflects our judgment at this date and is subject to change without notice. This should not be construed as an offer or solicitation to buy or sell securities. This information is not intended to be legal or tax advice. Please consult a tax, legal, or financial professional with questions.

Investors should consider the investment objective, risks, and charges and expenses before investing. Different types of investments involve varying degrees of risk, and there can be no assurance that any specific investment will be either suitable or profitable for a client or prospective client’s wealth management investment portfolio. Past performance is not an indication of future performance. International Assets Advisory, LLC and its affiliates, employees and/or directors may have positions in these securities, and may as principal or agent, buy from or sell to customers. All securities are subject to price and yield change and subject to availability. Investments in securities and insurance products are: NOT FDIC-INSURED/NOT BANK-GUARANTEED/MAY LOSE VALUE. Stocks, options, and mutual funds are subject to market volatility and may lose value. Mutual funds, Unit Investment Trusts and Variable Annuities are sold by prospectus only. Please read the prospectus carefully for important information about fees and risk considerations. Bonds are subject to changes in interest rates, risks of defaults by issuer, and the loss of purchasing power due to inflation, or the risk that an issuer will be unable to make interest or principal payments. Additionally, bonds and short-term investments entail greater inflation risk than stocks. Any fixed-income security sold or redeemed prior to maturity may be subject to a substantial gain or loss. Investing in securities underlying in currencies other than the U.S. dollar involves certain considerations comprising both risk and opportunity not typically associated with investing in U.S. securities. The security may be affected either favorably or unfavorably by fluctuation in the relative rates of exchange between currencies, by exchange control regulations, or by indigenous economic and political developments.