I love eggs. I like them for breakfast, lunch, dinner; I love them scrambled, poached, boiled, in an omelette–whatever, whenever–I love them. What protein-rich food is as flavorful, flexible, and easy to prepare for a quick and satisfying meal? Who doesn’t like eggs?
Well neither my dad, my mother-in-law, my brother-in-law, nor my wife can stand eggs, and they refuse to eat them, severely limiting meal planning with them. Then, to my dismay, a year ago my one-year-old son experienced an allergic reaction to eggs. (Another relation on the opposing side, but not by choice.) So last week I took him to the doctor for further tests, hoping he had outgrown his egg allergy. As the doctor and I exchanged pleasantries, he asked what I do for a living. Then, of course, he asked me how the presidential election will impact the stock market. I am assuming this same question is on a lot of investors’ minds today.
While the election outcome may be uncertain, what is certain is that on the news we will get an earful of the thoughts and musings of political pundits and prognosticators, fortunately interrupted by visions of the Cubs quest to win their first World Series since 1908.
But trying to predict the stock market’s fluctuations based on a presidential election is a loser’s game. Short-term gyrations in the market are the norm and unanticipated events will always play a role in capital markets. But rather than trying to predict these movements and act on them, it is disciplined investing that provides consistent growth to investors.
Clearly, the President of the United States plays an integral role in the future of our country, yet the evidence shows that over the long-term, capital markets have provided reasonable returns throughout history.
So what should we do?
We can run stress tests and evaluate our scenario planning. And, like monitoring an eggs allergy, we need to see if anything has changed in our life and in our investments. Unfortunately, my son is still allergic to eggs; in the future he may grow out of it, and he may not. We need to get more lab work done and also build a plan to test how he reacts to foods containing eggs and to eggs prepared in various ways.
Similarly, your investment decisions may require adjustments given your specific situation and your appetite for risk. Consciously monitoring and evaluating your plan is key, but changing your entire plan based on the presidential election is not a reliable criterion for predicting the stock market.
So as the election heats up, don’t let your emotions get the best of you. Regardless of your political affiliations, you will encounter beliefs contrary to your own. Spirited discourse and debate are not usually harmful, and it can often help clarify our own thoughts. And of course, everyone has a right to their own opinion. For my entire life, I have been surrounded by a family of “egg haters.” But somehow, we still manage to get along, and most of the time we even like each other.
A final thought–if you get into fights with everyone you talk to about politics, I suggest that you start talking about the Cubs. It’s a lot more fun.