The Stock Market Doesn't Care About Political Parties | Series 7.3

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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 next episode of this

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Raising Your Investment Mindset series. This series we're really

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trying to help you reframe how you may view the scary unknown

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that is investments, and therefore be able to utilize

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them in a more constructive way, better reach your goals, and

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really just make life more enjoyable.

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As always, if you like what you are hearing, please make sure to

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subscribe, follow us on Apple podcast or really wherever you

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listen. Clicking those stars, leaving the reviews, it really

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helps us reach the literally millions of other young families

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out there just like you.

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Last week, we discussed how to many people wind up buying high

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and selling low because of the role that those things called

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emotions tend to play in our decision making, and the lack of

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education that tends to be out there that's provided to us, the

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lack of perspective on what's normal, so a 10% drop in the

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market every 18 months on average actually is normal. So

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if you haven't checked out that episode yet, definitely do that

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soon.

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

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Political Parties, which may sound like it doesn't really

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make much sense. You know, how could these seemingly

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diametrically opposed groups that are influencing basically

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basically every aspect of public policy not cause the stock

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market to play favorites, right? The goal for today's episode

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though, so the if you can say this at the end of the episode,

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then you have succeeded statement is "I now know better

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what generally affects the stock market and what generally

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doesn't."

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Gardening is something that I have taken up actually, in

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recent years. I had tried it when I was young, I was terrible

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at it, had very little success. And it wasn't until I was

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exposed to my father in law's garden that my interest became,

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you know, sparked again, and brings me to today. To me, I had

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kind of always thought that the only thing that was needed when

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it came to gardening was full sunlight and plenty of water and

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anything should grow, right? I mean, in school when I was

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growing up, and you learned about plants, that was the basic

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gist even now when I watch Sesame Street with my kids, it's

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what do plants need sunlight and water? And that's it, you see

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the sun come out and the flowers, you know, they just pop

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right up. What I learned, though, is that while those

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things are, you know, important, they're not the most important

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many times. Sure plants need water and sun, but a plant in

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

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

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heavy or too loose, the roots aren't going to do well. If the

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pH is off, the plant literally won't be able to get the

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nutrients it needs out of the soil. That was like wild to me

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how if the pH is incorrect, even if those nutrients may be there,

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the plant won't be able to absorb them properly with an

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incorrect pH. So the soil really is this all important element.

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And if you think all the way back to learning about the, you

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know, the fertile valley in history classes, it was that

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good soil that was renowned. And I mean, many plants out there,

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they don't even like full sunshine or lots of water. And

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so after you learn it, you're like, "Oh, hey, yeah, that makes

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a lot of sense."

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So when we speak to clients around election time, they're

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concerned about who is going to get elected in respect to the

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stock market many times. And it feels like this is the

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predominantly important water and sunshine. Concerned in

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general, I totally get. You want the person who you think is best

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running the country to be obviously going to win the

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

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historically doesn't really care one way or another what

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political party is in office. And so since we have clients

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that lean both ways, we tend to get about 50% of our clients

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calling us during any one election. Studies have been done

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on the President, the House, the Senate, and a combination of all

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three of these things to try to see which is the most favorable

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to the stock market. So maybe a Democratic president but split

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Congress, maybe a Republican president and a democratic, you

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know, Congress. All these different combinations. And what

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

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of time is that there is no strong correlation for any

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particular combination over the long term. So the most common

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thought we have is "oh Republicans are supposed to be

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good for business. So Republicans should mean a better

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stock market." And statistically when they look back at it, that

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is not true. There really is not anyone really strong correlation

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that you can point to and say, Ah, ha, we want them to be in

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office for the economy.

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What the stock market tends to be influenced by more than

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anything, though, is the certainty versus uncertainty

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factors that we've brought up a number of times. It is a leading

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indicator, which means it's acting now based on what it

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thinks is going to happen in the future. If a company comes out

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with a state of the art product, its stock would likely jump up,

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not because it's actually sold any of those products and

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actually made money off of those products but because the stock

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market thinks it is going to make more money, thinks this is

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going to happen in the future. Now, if the product winds up

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blowing up, the stock will subsequently drop, because it's

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saying they think this company is going to post really bad

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earnings, but again, in the future. If you think back to the

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last few significant events, you have COVID in 2020, you have the

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financial crisis back in 2008. With COVID global pandemic, you

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obviously had a ton of uncertainty on what was going to

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happen. Once this started to get clarified, hey, here's the plan

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of action, you saw things start to reverse course. And the

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market actually ended significantly up by the end of

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the year. In 2008, you saw major financial institutions like

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Lehman Brothers going under, others in significant jeopardy

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and so again, huge amounts of uncertainty. Once there was a

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plan of action, bailouts, and otherwise, you know, you saw

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this again, start to reverse course. So higher degrees of

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perceived certainty, is that fertile soil?

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So am I saying that government policy has no part in what

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affects the stock market? No, of course not. The plants do still

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need some water, they need some sunshine. And you know, even if

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it may not be the most important factor per se, what political

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parties may win or lose in general has historically, like

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we said, not been something worth getting upset about. But

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based on each individual administration's policies, and

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what they put into play can certainly affect how the stock

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market reacts to that news is, do they think this will increase

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the growth of companies? Or do you do they think will be, you

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know, a hindrance to the growth of companies?

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As we get to the end of this episode, let's circle back

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around to the goal statement. If you can say "I now know better

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what generally affects the stock market and what generally

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doesn't", then you have succeeded in the main takeaway

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from today. Congratulations.

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Thanks for tuning in today and join us for next week's episode

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called Hollywood's Stock Market, where we're going to break down

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how what you are shown in movies and TV creates a big part of the

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basis for that uneasiness around investments today in my opinion.

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Overall, if you're able to implement what we covered today,

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as always fantastic. Bravo. You have less to worry about them

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before and you can focus more on enjoying life. If you are

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wanting help with these things, though, or have questions you

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need help in clarifying, check out that Ask Joe section on the

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show's website EnjoyMore30s.com. That's EnjoyMore30s.com. You can

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also connect with me directly by visiting my wealth management

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firm New Horizons Wealth Management at nhwmllc.com. Until

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next week, thanks for joining me today and I look forward to

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connecting with you 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.