So Now What?
This has not been an easy year to live through, much less invest through. We’ve faced a global pandemic, a historic recession, and the culmination of a contentious, emotional presidential election cycle. Though a delayed result was always a high probability outcome, that does not mean the recent weeks have been easy. The headlines have been inflammatory, and social media has been worse. At times like these, investing can take a back seat to other concerns. But no matter what else is competing for your attention, our priority at Baird is getting you to your long-term financial goals. We’ll be here to answer questions, provide perspective where we can and be a steadying partner in any set of circumstances.
We’ll face many elections over our lives. Not all of them will feel as intense as the most recent one, but they will always be emotional and weighty events. This is precisely why we believe politics and investing do not mix well. Politics are hot-blooded and volatile; investing should be evidence-based and rational. To put it bluntly, politics and investing go together like toothpaste and orange juice.
With control of the Senate still up in the air, political volatility may remain elevated over the coming months. The good news for investors is that however the chips may fall in Washington, historically it has not mattered for the patient, long-term investor. As you can see in this chart, near-term S&P 500 returns have been a mixed bag in any of the three potential outcomes. But one year out, the average return under all three scenarios has turned positive. Uncertainty will abate, the government will govern and market focus will broaden to include other factors.
History is littered with surprises, and the kinds of things that truly move the market are never known in advance. An investor has no edge – none! – in trying to time the market based on some guess about what might happen in the short run. But they do have an edge when they focus on their own behavior and stay as patient as possible. When our advisors craft a plan for a client, the plan is to meet that client’s goals regardless of what happens in life. Pandemics, elections, booms, busts – a durable financial plan can not only survive an uncertain future, but profit from it
Let the political intrigue play out as it will, and if this is an anxious time for you, we hope you can spend time focusing on all the things that matter most to you: contentment, a legacy, time spent with family and friends, living life to the fullest. Do what you can to stop obsessing about the future – and if your financial situation is one of the things that is keeping you awake at night, please reach out to your Baird Financial Advisor.