The Election and the Bull Market: A Tale of the Unloved

I believe most will agree this is a very unloved and unpopular presidential election. As Trevor Noah from The Daily Show summed up in his Show on July 6: both Senator Hillary Clinton and Donald Trump are running against the only candidate they could possibly beat. 

  

Laugh or cry but read what James Stack wrote in his recent newsletter about the U.S. stock market: from inception in March 2009, this has been one of the most unloved bull markets in Wall Street history.

Why would he say this? Our U.S. stock markets have gone sideways since December with a roller coaster of a ride.  The S&P has gone from 2092 (December 4, 2015) down 263 points to a low of 1829 (February 11, 2016).  Then up 361 points to a high of 2190 (August 15, 2016) and it is back retrenching at around 2088 this week (November 3, 2016).

The serious money is wondering when we will see the next big fall. The funny money believes they are smarter than the rest of us and are trading every day. What I have is perspective. I have watched clients talk about the fish that got away. Their portfolio was up 80% at one point in their history. And then, like a Vegas gambler, they gave it all back and sometimes end up being down 30%. And that is if they were lucky.  That is one wild ride in my book.  Remember, it isn't about making all the money it is about making and keeping as much of it as possible.

What should you do? Much like our politicians, what we say has to do with whom we are talking to. For those that like the ride and can truly hold out through the high highs and low lows - well then hold if your overall allocation is correct and if you won't need to sell stocks at the wrong time. 

History does support that this will yield higher returns. But most of us are less robotic and more emotional. Therefore, would we be better off taking some (or a lot) of money off the table at this time? Where do we put it?  Cash? Why not? Sometimes a zero percent return is better than a negative 30% return.

During most election years, our U.S. stock markets end up higher for the year. It is the year after an election we need to keep an eye on. Again, quoting James Stack: the past 88 years, 9 of the 14 U.S. economic recessions began in the year following the election. Additionally, 3 others began during a presidential election year.

This isn't a prediction of what is to come. This is an 'a-ha' moment when we decide what kind of investor we are and whether our portfolio matches our intentions.  

For more on emotional investing take a look at what Meir Statman wrote in an article on June 14, 2015 in the Wall Street Journal titled "How Your Emotions Get in the way of Smart Investing."

Book an appointment today if you would like more information or if you would like some help on how to evaluate and allocate your investment portfolio.

                         Your Team at Berson Money Management

                                            ...because money matters!

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