Episode 3
The Stock Market Doesn't Care About Political Parties | Series 7.3
How could these diametrically opposed groups that are influencing basically every aspect of public policy not cause the stock market to play favorites?
- When it comes to the stock market, though it historically doesn't really care one way or another what political party is in office. (03:33)
- What the stock market tends to be influenced by more than anything, though, is the certainty versus uncertainty factors that we've brought up a number of times. (05:07)
- But based on each individual administration's policies, and what they put into play can certainly affect how the stock market reacts to that news is, do they think this will increase the growth of companies? (07:02)
Quote for the episode: 'If you can say "I now know better what generally affects the stock market and what generally doesn't", then you have succeeded in the main takeaway from today.' (07:20)
Securities offered through TFS Securities, Inc., and Advisory Services through TFS Advisory Services, an SEC Registered Investment Advisor Member FINRA/SIPC. TFS Securities, Inc., is located at 437 Newman Springs Road, Lincroft, NJ 07738 (732) 758-9300.
Transcript
Welcome to the Enjoy More 30s Family Finance
Voiceover Audio:podcast. The only podcast dedicated to making life more
Voiceover Audio:enjoyable for young families by hitting on the financial topics
Voiceover Audio:that tend to weigh on us, stress us out, and distract our focus
Voiceover Audio:from simply enjoying life.
Joseph Okaly:Hello, and welcome to the next episode of this
Joseph Okaly:Raising Your Investment Mindset series. This series we're really
Joseph Okaly:trying to help you reframe how you may view the scary unknown
Joseph Okaly:that is investments, and therefore be able to utilize
Joseph Okaly:them in a more constructive way, better reach your goals, and
Joseph Okaly:really just make life more enjoyable.
Joseph Okaly:As always, if you like what you are hearing, please make sure to
Joseph Okaly:subscribe, follow us on Apple podcast or really wherever you
Joseph Okaly:listen. Clicking those stars, leaving the reviews, it really
Joseph Okaly:helps us reach the literally millions of other young families
Joseph Okaly:out there just like you.
Joseph Okaly:Last week, we discussed how to many people wind up buying high
Joseph Okaly:and selling low because of the role that those things called
Joseph Okaly:emotions tend to play in our decision making, and the lack of
Joseph Okaly:education that tends to be out there that's provided to us, the
Joseph Okaly:lack of perspective on what's normal, so a 10% drop in the
Joseph Okaly:market every 18 months on average actually is normal. So
Joseph Okaly:if you haven't checked out that episode yet, definitely do that
Joseph Okaly:soon.
Joseph Okaly:Today's episode is titled The Stock Market Doesn't Care About
Joseph Okaly:Political Parties, which may sound like it doesn't really
Joseph Okaly:make much sense. You know, how could these seemingly
Joseph Okaly:diametrically opposed groups that are influencing basically
Joseph Okaly:basically every aspect of public policy not cause the stock
Joseph Okaly:market to play favorites, right? The goal for today's episode
Joseph Okaly:though, so the if you can say this at the end of the episode,
Joseph Okaly:then you have succeeded statement is "I now know better
Joseph Okaly:what generally affects the stock market and what generally
Joseph Okaly:doesn't."
Joseph Okaly:Gardening is something that I have taken up actually, in
Joseph Okaly:recent years. I had tried it when I was young, I was terrible
Joseph Okaly:at it, had very little success. And it wasn't until I was
Joseph Okaly:exposed to my father in law's garden that my interest became,
Joseph Okaly:you know, sparked again, and brings me to today. To me, I had
Joseph Okaly:kind of always thought that the only thing that was needed when
Joseph Okaly:it came to gardening was full sunlight and plenty of water and
Joseph Okaly:anything should grow, right? I mean, in school when I was
Joseph Okaly:growing up, and you learned about plants, that was the basic
Joseph Okaly:gist even now when I watch Sesame Street with my kids, it's
Joseph Okaly:what do plants need sunlight and water? And that's it, you see
Joseph Okaly:the sun come out and the flowers, you know, they just pop
Joseph Okaly:right up. What I learned, though, is that while those
Joseph Okaly:things are, you know, important, they're not the most important
Joseph Okaly:many times. Sure plants need water and sun, but a plant in
Joseph Okaly:the wrong type of soil is going to struggle and most likely die
Joseph Okaly:regardless of how much water and sun gets. If the soil is too
Joseph Okaly:heavy or too loose, the roots aren't going to do well. If the
Joseph Okaly:pH is off, the plant literally won't be able to get the
Joseph Okaly:nutrients it needs out of the soil. That was like wild to me
Joseph Okaly:how if the pH is incorrect, even if those nutrients may be there,
Joseph Okaly:the plant won't be able to absorb them properly with an
Joseph Okaly:incorrect pH. So the soil really is this all important element.
Joseph Okaly:And if you think all the way back to learning about the, you
Joseph Okaly:know, the fertile valley in history classes, it was that
Joseph Okaly:good soil that was renowned. And I mean, many plants out there,
Joseph Okaly:they don't even like full sunshine or lots of water. And
Joseph Okaly:so after you learn it, you're like, "Oh, hey, yeah, that makes
Joseph Okaly:a lot of sense."
Joseph Okaly:So when we speak to clients around election time, they're
Joseph Okaly:concerned about who is going to get elected in respect to the
Joseph Okaly:stock market many times. And it feels like this is the
Joseph Okaly:predominantly important water and sunshine. Concerned in
Joseph Okaly:general, I totally get. You want the person who you think is best
Joseph Okaly:running the country to be obviously going to win the
Joseph Okaly:election. When it comes to the stock market, though it
Joseph Okaly:historically doesn't really care one way or another what
Joseph Okaly:political party is in office. And so since we have clients
Joseph Okaly:that lean both ways, we tend to get about 50% of our clients
Joseph Okaly:calling us during any one election. Studies have been done
Joseph Okaly:on the President, the House, the Senate, and a combination of all
Joseph Okaly:three of these things to try to see which is the most favorable
Joseph Okaly:to the stock market. So maybe a Democratic president but split
Joseph Okaly:Congress, maybe a Republican president and a democratic, you
Joseph Okaly:know, Congress. All these different combinations. And what
Joseph Okaly:they found after what I'm sure was a lot, a lot of work, a lot
Joseph Okaly:of time is that there is no strong correlation for any
Joseph Okaly:particular combination over the long term. So the most common
Joseph Okaly:thought we have is "oh Republicans are supposed to be
Joseph Okaly:good for business. So Republicans should mean a better
Joseph Okaly:stock market." And statistically when they look back at it, that
Joseph Okaly:is not true. There really is not anyone really strong correlation
Joseph Okaly:that you can point to and say, Ah, ha, we want them to be in
Joseph Okaly:office for the economy.
Joseph Okaly:What the stock market tends to be influenced by more than
Joseph Okaly:anything, though, is the certainty versus uncertainty
Joseph Okaly:factors that we've brought up a number of times. It is a leading
Joseph Okaly:indicator, which means it's acting now based on what it
Joseph Okaly:thinks is going to happen in the future. If a company comes out
Joseph Okaly:with a state of the art product, its stock would likely jump up,
Joseph Okaly:not because it's actually sold any of those products and
Joseph Okaly:actually made money off of those products but because the stock
Joseph Okaly:market thinks it is going to make more money, thinks this is
Joseph Okaly:going to happen in the future. Now, if the product winds up
Joseph Okaly:blowing up, the stock will subsequently drop, because it's
Joseph Okaly:saying they think this company is going to post really bad
Joseph Okaly:earnings, but again, in the future. If you think back to the
Joseph Okaly:last few significant events, you have COVID in 2020, you have the
Joseph Okaly:financial crisis back in 2008. With COVID global pandemic, you
Joseph Okaly:obviously had a ton of uncertainty on what was going to
Joseph Okaly:happen. Once this started to get clarified, hey, here's the plan
Joseph Okaly:of action, you saw things start to reverse course. And the
Joseph Okaly:market actually ended significantly up by the end of
Joseph Okaly:the year. In 2008, you saw major financial institutions like
Joseph Okaly:Lehman Brothers going under, others in significant jeopardy
Joseph Okaly:and so again, huge amounts of uncertainty. Once there was a
Joseph Okaly:plan of action, bailouts, and otherwise, you know, you saw
Joseph Okaly:this again, start to reverse course. So higher degrees of
Joseph Okaly:perceived certainty, is that fertile soil?
Joseph Okaly:So am I saying that government policy has no part in what
Joseph Okaly:affects the stock market? No, of course not. The plants do still
Joseph Okaly:need some water, they need some sunshine. And you know, even if
Joseph Okaly:it may not be the most important factor per se, what political
Joseph Okaly:parties may win or lose in general has historically, like
Joseph Okaly:we said, not been something worth getting upset about. But
Joseph Okaly:based on each individual administration's policies, and
Joseph Okaly:what they put into play can certainly affect how the stock
Joseph Okaly:market reacts to that news is, do they think this will increase
Joseph Okaly:the growth of companies? Or do you do they think will be, you
Joseph Okaly:know, a hindrance to the growth of companies?
Joseph Okaly:As we get to the end of this episode, let's circle back
Joseph Okaly:around to the goal statement. If you can say "I now know better
Joseph Okaly:what generally affects the stock market and what generally
Joseph Okaly:doesn't", then you have succeeded in the main takeaway
Joseph Okaly:from today. Congratulations.
Joseph Okaly:Thanks for tuning in today and join us for next week's episode
Joseph Okaly:called Hollywood's Stock Market, where we're going to break down
Joseph Okaly:how what you are shown in movies and TV creates a big part of the
Joseph Okaly:basis for that uneasiness around investments today in my opinion.
Joseph Okaly:Overall, if you're able to implement what we covered today,
Joseph Okaly:as always fantastic. Bravo. You have less to worry about them
Joseph Okaly:before and you can focus more on enjoying life. If you are
Joseph Okaly:wanting help with these things, though, or have questions you
Joseph Okaly:need help in clarifying, check out that Ask Joe section on the
Joseph Okaly:show's website EnjoyMore30s.com. That's EnjoyMore30s.com. You can
Joseph Okaly:also connect with me directly by visiting my wealth management
Joseph Okaly:firm New Horizons Wealth Management at nhwmllc.com. Until
Joseph Okaly:next week, thanks for joining me today and I look forward to
Joseph Okaly:connecting with you again soon.
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Voiceover Audio:accountant, lawyer, or other professional before acting upon
Voiceover Audio:any content or information found here first. Joe is affiliated
Voiceover Audio:with New Horizons Wealth Management LLC, a branch office
Voiceover Audio:of TFS Securities, Inc., and TFS Advisory Services an SEC
Voiceover Audio:Registered Investment Advisor Member FINRA/SIPC.