It’s late October and we are on the verge of the presidential election. This is the first time and the last time for a while that I can write about an imminent Presidential election. So, here we go.
Regardless of which candidate you support, you probably believe that he or she will be the best for America. And, we can all agree that a strong economy and stock market would be characteristics of that. So, how is this election going to affect our economy?
Data since the end of World War II consistently says that our economy does better when a Democrat occupies the White House. This is true when measure by almost any criteria. For example, during this time frame, real GDP grew at 3.3% annually. However, the growth rate under Democratic Presidents was 4.35%, while under Republican Presidents it was 2.54%. Does this mean that a Democrat as President will be better than a Republican? Not necessarily.
In a study done by Alan S. Blinder and Mark W. Watson of Princeton University*, it was found that reactions to fiscal policy and monetary policy** were close to even across the two parties. In fact, monetary policy was a little more pro-growth under Republican Presidents. They found that about ½ of the difference in growth rates could be attributed to what they call “luck factors”. Things such as the price of oil and unexplained productivity shocks that affect the economy, but are not a result of any fiscal policy. (“the rest remains, for now, a mystery”*) This seems to support my belief that Presidents are given too much credit and too much blame for how the economy acts during their term(s). I believe the economy is more driven by the normal business cycle*** than any fiscal policy. (Fiscal policy is more likely to affect the economy and the business cycle over the longer term)
This is not to say that they have no influence on the economy, but perhaps less than most people think. It’s also important to remember that the President does not create any laws at all. Although we constantly hear about how the two major candidates will change the tax laws, it’s actually Congress that would do that. And this brings us to the more pressing issue on November 8th: how will the Congressional elections pan out? Well, here’s the good news. I believe the best case scenario for our country is a split Congress. And, with 1/3 of the Senate and all of the House up for re-election, I believe this is what we are going to get. I think that the Senate will go back to the Democrats, and the House will remain with the Republicans.
This should give us protection from far left and far right policies. Hopefully, this will give us compromised legislation that helps the entire country and not just one political party. This may sound Pollyanna-ish, but I still do dream of a time when our legislators work for more than just getting re-elected. But, I digress. The reality is that the economy and the stock market seemingly favor an environment where neither party is unchecked. This gives us more predictability; which the stock market enjoys.
I have heard so many times over the last several months that people do not want to invest because of how the election might turn out. This is being said on behalf of both parties. I don’t believe this is the best stance to take. There will undoubtedly be volatility in the days leading up to and following the election. But, this will be a short term phenomenon. In the long term, it probably won’t matter to the stock market who was elected in 2016. And, as always, the best strategy for achieving growth in the stock market is to invest for the long term.
*”Presidents and the Economy: A Forensic Investigation”, Alan S. Blinder and Mark W. Watson, Woodrow Wilson School and Department of Economics, Princeton University, November 2013
**Fiscal policy is the government’s revenue and spending policies (laws). Monetary policy is the process by which the central bank controls the money supply.
*** The business cycle is the fluctuation in economic activity that an economy experiences over a period of time. A business cycle is basically defined in terms of periods of expansion or recession…. According to the NBER, there have been 11 business cycles from 1945 to 2009, with the average length of a cycle lasting about 69 months, or a little less than six years. – Investopedia
*Non-deposit investment products and services are offered through CUSO Financial Services, L.P. (“CFS”), a registered broker-dealer (Member FINRA/SIPC) and SEC Registered Investment Advisor. Products offered through CFS: are not NCUA/NCUSIF or otherwise federally insured, are not guarantees or obligations of the credit union, and may involve investment risk including possible loss of principal. Investment Representatives are registered through CFS. Verity Credit Union has contracted with CFS to make non-deposit investment products and services available to credit union members.
Check the background of this investment professional on FINRA’s BrokerCheck.
A Financial Advisor registered through CUSO Financial Services, L.P., Gavin has 25 years of experience as an advisor in the Puget Sound area.
“I believe every client is unique and deserving of a personalized financial plan that will help them reach their individual financial goals. Before I make any recommendations, I like to get to know my clients. By asking the right questions, and developing an honest, trusting relationship, I can really get a sense of what’s going to work best for them.”
Gavin graduated from the University of Washington with a BA in Business Administration and started his financial career with US Bank in the Investment Department. Prior to joining Verity in 2006, he spent eight years with Piper Jaffray.
So what is Gavin’s vision for his dream retirement?
“My dream retirement would be absolutely worry free: financially, emotionally, and in every aspect of life. My finances would be in order so expenses for travel, luxuries, and gifts for the kids, grandkids, and great-grandkids would be taken care of. My kids would be financially sound, so I would be confident in their prosperity. This would give me the freedom to travel and play and do whatever it is I want to do.”
When Gavin’s not working, he enjoys spending time with friends and family, watching Husky football and taking weekend trips around the Northwest.
Gavin is registered to transact securities business in the states of AZ, CA, CO, FL, HI, ID, IL, KS, MN, NV, NY, OR, UT, VA and WA.
*Non-deposit investment products and services are offered through CUSO Financial Services, LP (“CUSO Financial”) (“CFS”), a registered broker-dealer (Member FINRA/SIPC) and SEC Registered Investment Advisor. Products offered through CFS: are not NCUA/NCUSIF or otherwise federally insured, are not guarantees or obligations of the credit union, and may involve investment risk including possible loss of principal. Investment Representatives are registered through CUSO Financial. Verity Credit Union has contracted with CUSO Financial to make non-deposit investment products and services available to credit union members. Atria Wealth Solutions, Inc. (“Atria”) is not a broker-dealer or Registered Investment Advisor and does not provide advice. CUSO Financial is a subsidiary of Atria.
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