The Stock Market Doesn't Care About Political Parties - REMIX | Series 10.5

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Welcome to the Enjoy More 30s Family Finance

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podcast. The only podcast dedicated to making life more

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enjoyable for young families by hitting on the financial topics

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that tend to weigh on us, stress us out, and distract our focus

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from simply enjoying life.

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Hello, and welcome to the Enjoy More 30s Family

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Finance podcast, REMIX for Rising Rates. In 2022, there

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have been significant declines across pretty much every major

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asset class through October. With rates rising significantly

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for the first time in a long time, it can be quite an

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unnerving experience to say the least. This series is going to

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attempt to help you with that going back and re-mixing a

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number of past episodes to help you emotionally navigate what

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have been pretty turbulent times so far in 2022. Each week, I'll

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be re-mixing a different episode bringing what I would say are

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timeless concepts back into focus in the present day

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situation. As always, before I begin, please share in light

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please reviews. I'd love to reach and help as many young

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families out there just like you.

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Today's episode is The Stock Market Doesn't Care About

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Political Parties - REMIX, which may sound like it doesn't make

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much sense. You know, how could these seemingly diametrically

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opposed groups that are influencing pretty much all of

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public policy not cause the stock market play favorites?

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During this original episode back in season 7 that I shared,

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I opened with a story about gardening. And gardening is

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something that I have taken up in recent years, it's something

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that I really enjoy outside of here. And I tried it when I was

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young, very little success very little. And it wasn't until I

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was exposed to my father-in-law's garden that my

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interest my kind of potential passion for it became sparked

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again. And to me, I had always thought that there were only two

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things that really plants would need; full sunlight and water.

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And everything should just grow if they had those two things,

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right? I mean, if you're in preschool, what does the plant

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need? Sunlight and water! You see the sun come out, and the

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flowers just pop right up. What I learned, though, is that those

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two things in water and sunlight, they a lot of times

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aren't even the most important thing that a plant might need.

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Sure they need the water, they need the sun, but a plant in the

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wrong type of soil is going to struggle and most likely die

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regardless of how much water and sun it gets. If the soil is too

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heavy, too loose, the roots won't do well. If the pH is off,

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the plant literally won't be able to get the nutrients it

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needs out of the soil. The soil is this all important element.

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And if you think all the way back to the learning that we

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probably all had about the fertile valley, it was the good

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soil that was renowned. I mean, many plants out there don't even

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like full sunshine or lots of water. They're a little water or

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full shade. You know, there's all different plants for

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different types of situations. And so after you learn it,

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you're like, "Yeah, this makes a lot of sense."

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So when we speak to clients around election times, they are

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concerned about who's going to get elected in respect to the

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stock market. It feels like this is the predominantly important

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water and sunshine like with the plans. Concerned in general, I

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certainly get. Obviously everybody out there wants the

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person who they think is best running the country. 100% makes

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sense. When it comes to the stock market, though, it

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historically doesn't really care either way. Studies have been

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done on the president, the House, the Senate, combining all

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three of these in different ways to see which one of those has

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been the most favorable to the stock market in past history.

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And what they found after what I'm sure was a lot of work is

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that there is no strong correlation for any particular

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combination over the long term.

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So how this applies to 2022 is that we recently had midterm

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elections, and you may be unhappy or you may be happy with

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how that turned out. Either way, though, you now know the market

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has not historically cared one way or another, which party

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controls what. One strong positive indicator, however, is

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the midterm elections themselves. So not who wins the

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elections, but the elections themselves. Going back to 1962,

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so quite a ways, there's been a market drawdown in every single

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midterm year with an average correction of 19% down. So 19%

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loss on average. The average recovery has been 32%. Going

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back even further to 1950, if we look at every 12 month period,

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immediately following the midterm election date, it has

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been positive. Every single one going back to 1950 with an

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average of 15.1%. Excuse me, I almost lost a piece there.

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15.1%. So there are never any guarantees when it comes to

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looking at past results. I mean, that's the standard investment

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disclosure, "past returns do not guarantee any future success."

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But at the same time, it would be prudent, I think, to say to

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at least be aware of such strong core correlations for sure.

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Overall, what the stock market tends to be influenced by more

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than anything is certainty versus uncertainty. It's a

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leading indicator, remember, which means it's acting now

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based on what it thinks is going to happen in the future. If a

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company comes out with a state of the art product, the stock

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probably will jump up. Not because it's actually made more

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money on this state of the art product yet, but because the

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stock market thinks it's going to make more money on it. Thinks

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this is going to happen in the future. Now, if the product

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winds up blowing up, the stock will subsequently drop because

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it's saying they think this company is going to post really

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bad earnings. But again, it's in the future. It's what they

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think. So am I saying that government policy has no part

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whatsoever in how the stock market is affected? No, of

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course, I'm not saying that they have no effect at all. The

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plants still do need some degree of water and sunshine, even if

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it may not necessarily be the most important factor. But what

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political party may win or lose in general has historically not

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been something worth getting upset about either way. Midterms

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on the other hand, have shown again, that very, very strong

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positive correlation following the midterms.

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So thanks for tuning in today and join us for next week's

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remix episode, Step Up, The Gain Is Gone - REMIX. While this

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original episode spoke about inheriting assets with large

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gains, what we're going to do is expand this to gains in general.

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And what you may want to look into for your own portfolio with

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likely declines so far across the board in 2022. As always,

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please remember to review and share for others and if you need

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any help, don't hesitate in reaching out. I probably have

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helped someone just like you. Till next week. Thanks for

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joining me today and I look forward to connecting with you

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again soon.

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The conversations on this show are

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Joe's opinions and provided for general information purposes

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only. They do not constitute accounting, legal, tax or other

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professional advice for your specific situation. You should

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always seek appropriate advice from a financial advisor,

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accountant, lawyer, or other professional before acting upon

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any content or information found here first. Joe is affiliated

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with New Horizons Wealth Management LLC, a branch office

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of TFS Securities, Inc., and TFS Advisory Services an SEC

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Registered Investment Advisor, Member FINRA/SIPC.