Why Elections often DON’T Matter - Nov 2024 (#44)

A warm welcome to you dear reader! Your dude Brent is hear to put your mind at ease this election day. For all you US citizens reading this I encourage you to get out and vote if you haven’t already and then… take a deep breath and relax… I’m about to give you a SOLID reason to relax… when it comes to the economy… by and large… elections DO NOT matter...

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Motivation

Presidents get a lot of the blame and take a lot of the credit for stock market performance while in office. However, a president's ability to impact the economy and markets is generally indirect and marginal.

-Investopedia

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Money

So… how could I say a thing as wild and inflammatory as ‘elections don’t matter!?’ For the simple fact that, for most people, in regards to what happens with the economy… they largely don’t! Every election cycle the powers at be do everything in their power to convince you that if you don’t vote for THEIR candidate the world as we know it is going to end… and guess what? It never does… Stock markets go up and Real Estate prices rise more often than they fall regardless of who’s in charge.

Just take a look at the below graphic:

What do you notice? By and large it doesn’t matter who’s president. In fact, after reviewing multiple studies (including the often cited President’s and the U.S. Economy: An Econometric Exploration by Blinder and Watson), I’ve come to the conclusion that outside factors such as oil prices, financial crises, terrorist attacks, pandemics, and many others make the data virtually impossible to decipher.

Long story short: Crap happens, and that has a much larger impact on our economy than who’s sitting in the white house. And although the president is very powerful, many of the factors that influence the economy the most (such a interest rates, natural disasters, commodity prices, and demographics) are largely outside of their control. And the items that they can control, like pushing through meaningful policy changes, can take YEARS to trickle down to the economy.

The reason I feel compelled to share this is I’ve heard SO MANY people say something to the effect of ‘I’m waiting to invest until after the presidential election.’ I think that is STUPID. Honestly, if your investing properly it should be over a long enough timeline that what happens in the election would just be a blip on your returns. Remember, short term thinking is the enemy of superior returns when investing.

Now I of course won’t deny that who’s president theoretically could make a MASSIVE difference on the economy, all I’m saying is that historically it really hasn’t mattered all that much when it comes to the economy. One of the most beautiful parts of how the U.S. government is set up is how much it restricts executive powers. And while these powers have been growing, they still work well enough that I really don’t think who sits in the white house next should play into your investing decisions.

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That’s all folks!

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