The U.S. Presidential Election

The U.S. Presidential Election

At time of writing, it’s still quite unclear who the next President of the United States will be. Joe Biden is narrowly in the lead having flipped the important swing state of Arizona and looks to be pulling ahead in Wisconsin too, but Donald Trump has taken key victories in other important areas like Florida and Ohio. 

However, if you want a much faster way of figuring out who’s going to win the 2020 Presidential Election, I’ve got an easy solution for you — just look at the team that won the Super Bowl this year.

There is a long-standing theory which posits that if an American Football Conference (AFC) team wins the Super Bowl in an election year, the Republican candidate will take the White House. On the flip side, if a National Football Conference (NFC) team takes home the Vince Lombardi trophy, then a Democrat will become Commander-in-Chief. So, considering that the Kansas City Chiefs won this year’s Super Bowl, Trump is a shoo-in to retain the presidency, right?

Add to that a similar theory that if the Washington Redskins win their last home game prior to an election, the incumbent party will retain the White House. So we can be doubly-sure that Trump is going to remain in office.

Of course, as I’m sure the very intelligent members of the MyWallSt community can tell, suppositions like these hold about as much water as a sieve. Humans don’t deal too well with uncertainty and since time began, people have tried to find patterns in the chaos that will tell them what’s going to happen next. 

Just think of all the times that “the next crash” was predicted over the ten-year bull market we’ve just come out of. Not one of those guys predicted that it would be a global pandemic that would end it all (and neither did an NFL game, come to think of it).

The position of POTUS is amongst the most influential titles you can have on this planet. It makes sense, then, that over the course of the past few days we’ve had a couple of dozen questions from our community members asking what they should do with their investments in light of the upcoming election. This is perfectly understandable.

We’ve endured a pretty volatile market over the past two weeks already in the run-up to yesterday’s polling. Part of this was caused by the fact that the U.S. is closing in fast on the unwelcome milestone of 10 million confirmed cases of COVID-19, while over 230,000 people have sadly lost their lives too (nearly four times the amount of casualties suffered over the entirety of the Vietnam War). 

Other concerns that are rattling the market are more directly related to the election, including the fact that whatever administration takes power will have influence over the next round of stimulus funding to help the paralyzed economy. And let’s not forget that it seems quite likely that we won’t have a definitive result for a couple of days thanks to the high-level of post-in ballots that were submitted during this election. President Trump also threatened last night to contest the result if he loses, which brings in the possibility of involvement from the Supreme Court. Remember in 2000 when the contest between George W. Bush and Al Gore was not decided upon until almost a month after the election date by the Supreme Court? If this is to transpire again, the market’s would more than likely turn ugly.

These are all extremely valid short-term concerns that have rightly spooked many investors. However, as long-term investors, we have the privilege of ignoring these short-term dips and bumps in the belief that — over the long-term — great companies will grow and increase in value. 

Here are two important points to consider as you watch (or avoid) the rest of the election coverage and whatever might happen after that.

Firstly, we have no idea how the market will react to things over the short-term. This is just a simple fact. Remember back in 2016 when many people predicted a total collapse if the once-wildcard candidate Trump came into power. After an overnight panic on the international markets, virtually all of the losses were recovered by market open and the Dow Jones actually closed the day up 257 points, while the Nasdaq and the S&P 500 both rose over 1% apiece. 

The second thing is that presidents tend to get way too much credit for their influence on the market over the course of their term — both in a positive and negative sense. We try to personify the workings of the economy as the president’s triumph or fault, but more often than not, they’ve had very little to do with it.

To finish, I’ll share a tweet from our recent podcast guest Morgan Housel which shows the average annual market returns from the twenty previous presidents. 

The takeaway? Vote Coolidge 2024.

JamesJames

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