As hard as it will be to ignore what’s shaping up to be a very contentious 2020 presidential campaign cycle, one veteran market strategist thinks investors should just turn off their TVs (or live-streams) and stay focused on corporate fundamentals.
We wish them well on this possible endeavor.
“We are starting to get questions on the election cycle next year. One of the things we believe is that elections don’t matter. That’s one of the biggest mistakes investors make is making decisions based on politics,” First National Bank of Omaha Chief Investment Officer Kurt Spieler said on Yahoo Finance’s The First Trade. Spieler said his firm remains more focused on the economic fundamentals and the earnings of companies as opposed to presidential politics.
“What does matter at times is what is the policy coming out of the elections. So with the differences between the Republicans and the Democrats today, policy could have an impact on the economy,” Spieler added.
That said, completely disconnecting from daily presidential election happenings is unlikely for most investors. Moreover, historical data suggests the market begins to price in election outcomes in advance of winners and their subsequent key policies taking hold.
In 2016, for instance, the S&P 500 fell 2.3% in the three months before the November 8 win for now President Trump, according to LPL Financial. Some investors at the time started to price in the potential for a Trump win, which was seen as a big wildcard to global policies. And back in 2008, the S&P 500 was rocked to the tune of 24.8% ahead of the November 4 election as the financial crisis descended onto Wall Street and Main Street.
“President Trump winning in 2016 caught many off guard, but maybe the weakness in stocks heading into the election was a signal of a new party in power,” said LPL Senior Market Strategist Ryan Detrick in a new research note. “History shows that stocks’ performance in the three months before an election could predict which party will win. In fact, stocks have been right for nearly 40 years.”
Perhaps the best strategy for investors? Read as many earnings calls as humanly possible ahead of Election Day 2020.