Investing in Election Years: Why Staying the Course Matters

00:00
Speaker 1
Welcome to Ewa’s finlit podcast. Ewa is a fee only RAA based out of Pittsburgh, Pennsylvania. We hope all listeners of this podcast will benefit as we deep dive into complex financial topics that we will make simplified for you. And we hope that this really serves as a catalyst so that you can make the best financial planning decisions for your family and also save time. Welcome, everyone, on today’s Finlit by EWA podcast, joined here by Ben Ruttenberg. And today we’re going to talk about a really timely discussion, how to best invest during an election year. And I think it’s important for the audience to know who’s given the advice. And are there any biases? Then we just need to know who you’re voting for.

00:50
Speaker 2
Well, thanks, Matt. I’ve thought long and hard. I’m actually going to be voting for Mike Tomlin, head coach of the Pittsburgh Steelers. That’s my guy. Ride or die with Mike. He’s been the coach for the Steelers since 2007, and I’d vote for him. He’s got a lot of haters out there, but that is my guy.

01:06
Speaker 1
You know, he’s the most, like. I think if you look at every big sports franchise, he’s like the third and third place, the most winest winning coach last decade.

01:15
Speaker 2
You look at NFL coaches, they, of.

01:17
Speaker 1
Course, it’s like high 60%.

01:19
Speaker 2
We’re somehow dovetailing into sports already. The podcast is about 30 seconds in, but yes, he’s coached this year since 2007. You look at the longevity of NFL head coaches. Very rarely does a coach last, you know, 17 years in one spot. I mean, it is. It is pretty rare. So I think we’re very lucky to have him here in Pittsburgh, which is where we’re filming here. And not a lot of people feel that way.

01:41
Speaker 1
Well, you just put us on tangent. We’ll stay on the tangent. That’s fine. So who’s going to win the election between Russell Wilson and Justin Fields?

01:47
Speaker 2
Really good segue there. I think to start probably Russell Wilson. I think it’s harder to start a young.

01:56
Speaker 1
We can trust Ben because Ben was an Ohio state guy, and if he just picked a non Ohio state quarterback over an Ohio state quarterbacks. All right, we can trust you, Ben, continue.

02:05
Speaker 2
Yeah, I think it’s harder to start Justin Fields, and then if he plays bad, pull him and put Russ back in with a younger quarterback. I think it’s harder for him. You know, you don’t want to ruin his confidence or anything. So I think to start, Russ will start. And you know what I’m higher on Russ than some, I think. I don’t put a lot of stock in the preseason. We’ve seen quarterbacks play really well in the preseason in the past, and it hasn’t necessarily translated to regular season success.

02:31
Speaker 1
Some people are saying trade Russ to get the guy from the. He’s not. He’s not there in Tennessee anymore. Who’s the guy in Tennessee?

02:36
Speaker 2
Ryan Tannehill.

02:38
Speaker 1
Yeah. He’s a free agent because he played over under Smith.

02:42
Speaker 2
Under Arthur Smith. Yeah.

02:43
Speaker 1
And they had a good run.

02:44
Speaker 2
They did. That was when Tennessee was the one or two seed with. They were really cooking with Derek Henry. But, yeah, Tannehill’s. I think he’s a free agent for a reason.

02:55
Speaker 1
Gotcha. Okay, perfect. Well, all right, let’s give it. Let’s get into it. Ben, I guess, won’t give us answer, so we have to run with that. All right. So first and foremost, our advice in general is don’t mix politics with your investment policy statement. Don’t mix the two, because if you just look back, dating back from. We’ll put the slide on the screen. So if you’re watching this on their YouTube channel, even Spotify has video. But we’ll. This will be an audio as well to tell you the story. You put a $1,000 in the market in 1926. That thousand dollar, just a $1,000 has grown to $14.5 million in 2023. Now, that’s almost 100 years. But there’s huge returns. And this is going to show you know, on the screen here, republican, Democrats. Looks like Democrats have been in the office more than Republicans.

03:46
Speaker 2
Is that true? Yeah, we’ll get to that in a couple slides here.

03:49
Speaker 1
But, yes, but I mean, the growth rates between the two in general are very similar. I mean, they’re within a couple basis points, I believe so, yeah.

03:58
Speaker 2
You wouldn’t be able to, if you took the colors out of this and you just made it totally gray, you wouldn’t be able to tell that this was separating Democrats and Republicans. There’s a lot of, I don’t know, black and white thinkers that think one party comes in office and the market goes down and the other party comes in, saves it, and vice versa on both sides. But if you just look at this, the math doesn’t bear that out.

04:20
Speaker 1
Okay, so the next slide I love this is. So, Ben, tell us what’s going on. This is 100 last ten years. On the left side, you have 100 grand. And it gives us three scenarios to break this down for us.

04:33
Speaker 2
Yeah. So this is looking at in the last ten years, you have 100,000 invested since December of 2013. And this is showing if you had invested it only when democratic presidents were in office. Only when republican presidents were in office. And then the third line being, if you were invested just the entire time. So if you were just invested when only Democrats were in office, you would have had. Your 100,000 would have grown to 172,000. If you were only invested when Republicans were in office, your 100,000 would have grown to 181,000. But if you were invested the entire time, both Democrats and Republicans, your 100,000 grows to 311. So, Matt, how often do you hear, hey, I’m nervous about the market because I’m thinking there’s going to be a shift in political power?

05:17
Speaker 2
Well, this is saying, hey, regardless of who’s in office, you should stay invested. Yeah.

05:22
Speaker 1
I mean, it’s not almost double. Not quite double, but, I mean, it’s. It’s obvious there. Then if you look at that same data over 70 years, it’s not even close. Like 100 grand or. No, this is 1000 over 70 years. Republicans, only 31,000. Democrats only 50,000 invested the whole time, 1.58 million. So it’s just very clear you got to stay in. There’s going to be good years in both. So, next slide. This just shows S and P 500. I love this compounded growth rate between 20. Yeah, 1926 till to the end of 2023, the compounded growth rate of the SP 500 were. Was 10.3%. Now, for election years, and this is extra data for saying you should definitely invest during all election years, you’re actually at 11.6%. So if you take every.

06:13
Speaker 1
Just invest once every four years, those election years that people are scared of are the best years on average. Midterm elections, we slide down a little bit. Still positive, 7.4% on average. And then non election years, where there’s no midterm or present election, it’s actually 14.8%. So the midterm elections actually bring it down a little bit. Non election years are the best, and then presidential election years are better on average. So very interesting data. All right, well, ben, what are we looking at now?

06:46
Speaker 2
Yeah, this is showing us stocks in the actual presidential election year itself, showing how, kind of a further breakdown, quarter by quarter, how presidential election years compare to other years. So, generally speaking, first half of presidential election years tend to be a little bit more sluggish. So if you look at the first and second quarters of election years, you’re seeing slow growth in the s and P 500. So 1.3% averaged out in the first quarter of election years, 1.5% in the second quarter, and then you see larger jumps in the third and fourth quarters. So election years, you’re seeing 6.2% jumps in the third quarter, and then 3.3% jumps in the fourth quarter. I think high level. Again, this is mostly showing that you’re not seeing a huge swing one way or the other in a presidential election year versus another year.

07:40
Speaker 2
The market is relatively performing in a similar fashion regardless of whether or not it’s an election year.

07:46
Speaker 1
Interesting. Okay, well, all right, so we’re going to edit this out for a second. I think we will skip that slide of the contested. Yeah, I don’t see a point of. Does that just happen? Just stupid. What are. Satisfaction with direction. The country can be a contrarian indicator of the market.

08:09
Speaker 2
Yeah. This is saying, like, even if. So, like, the graph on the left is showing satisfaction levels in America. So, you know, February of 2000, 170 percent.

08:24
Speaker 1
Oh, the satisfaction rate was 70% and the market crashed.

08:27
Speaker 2
Yeah, exactly. And, like, 2023, like, low, like, a low level of satisfaction doesn’t necessarily mean that the market’s doing bad.

08:35
Speaker 1
Like, okay, if you. Perfect. You explained it well. I’m gonna hand it to you.

08:38
Speaker 2
Okay.

08:39
Speaker 1
Okay. All right, edit’s done. Ben, this is, in my opinion, the most important slide, because this shows that when people just like, we don’t wanna mix. You wouldn’t give us a straight answer. That’s okay. Don’t wanna mix politics with your policy, your investment policy. More importantly, don’t mix your feelings with your investment policy. Because in general, if you feel good about what’s going on in the country, like, if you’re like, part of the, out there, the public, you feel good about it. It’s probably, history shows it probably doesn’t bode well for the stock market. If you feel really bad, it probably means the stock markets that do well. So read this data for us and explain this for us.

09:21
Speaker 2
Yeah, this is really interesting. This is a gallup satisfaction level poll that was recorded every month after April 2000. So if you look at the, basically, the y axis is how satisfied Americans were with the way things are going in the United States. I’m just going to point your attention to February 2000, 170 percent. So very satisfied country. You look at December 2023, 22%, relatively lower in that satisfaction level. Well, that doesn’t necessarily mean that the market is going to perform better if satisfaction levels are high. So if you look at the column on the right there, when the satisfaction levels of Americans were less than 33%.

10:04
Speaker 2
So when less than 33% of Americans were satisfied with how the market, with how the country was doing was going, stock market returns were 11.3%, which is actually higher than when the majority of Americans were actually satisfied. So when more than 33% of Americans were satisfied, returns were only 9.7. So over a percentage and a half swing, just even though Americans weren’t as satisfied of the direction of the country.

10:30
Speaker 1
The scary thing to me with this is that in 2001, it looks like we reached like an all time high of satisfaction. Then the tech bubble that happened 2000 through 2002 was one of the worst drops we’ve ever seen in the us stock market. You know that people call that refer that as like the lost decade, right? Because then we had 2008 financial crisis climb back up. Then 2008, we had it again. That took a couple of years to recover. So people in America were feeling great, and then boom, stock market crashes. And then if we take the opposite of you, in 2008 at the financial crisis, satisfaction levels were 7%. Probably a couple people that bet against, you know, what was happening were satisfied. The rest of the country was miserable.

11:19
Speaker 1
We have now been on the greatest bull, one of the greatest bull runs of history in America from to that low satisfaction level for the next 1516 years. So again, it’s, again, don’t mix your feelings and don’t let that affect your. Because a lot of people sat out in 2008 and they missed one of the greatest runs.

11:37
Speaker 2
I was going to say, how easy would it have been in October of 2008, you’re at 7% level of satisfaction to pull your money out and just sit on the sidelines and wait for it?

11:45
Speaker 1
A lot of people did.

11:46
Speaker 2
Again, a lot of people did and actually put your money in. Same thing. February 2040, 5% level of satisfaction. That’s in context to this graph. That’s very good. A month later, we saw a 30% drop in the market with the COVID plot. So again, you’re feeling good. If you took your money out in that Covid pot, in that Covid drop in that next month, and then you waited until the market actually recovered to put the money back in, then you’re really setting yourself back. So you’re right. You can’t let how you’re feeling about the way the country’s going dictate your investment strategy.

12:20
Speaker 1
This is crazy. A lot of stuff out of your control. Well, how do we manage our feelings, Ben? What do you do to manage your feelings. I get in ice baths. People call me crazy, but I think it helps. I don’t know.

12:30
Speaker 2
Yeah, I think.

12:31
Speaker 1
What’s your trip? Tips, tricks, whatever you do a good.

12:34
Speaker 2
Workout definitely helps, whether it’s a run or, you know, something to clear your head, long walk, time spent away from what’s stressing you out, and, you know, call a friend. I think that’s a dying art. Call someone you love, ask them how their day’s going. That helps.

12:54
Speaker 1
It’s good advice. And Ben’s. We have goals here at UWA. Monthly goal. And his goal was to run, like, an absurd amount of miles this month. How many miles was the goal?

13:03
Speaker 2
I mean, it was nothing.

13:05
Speaker 1
So he. Now, are you on track for that?

13:06
Speaker 2
I am, yeah. All right. All right.

13:09
Speaker 1
Just making sure. So Ben lives what, you know, he preaches what he. What he talks about here, and yes, if Mike Tomlin was running, I do believe he would vote for Mike Tomlin, for sure.

13:20
Speaker 2
Yeah. I think I wanted. This is really important. Cause I actually hear this all the time. It’s, hey, I’m sitting on some cash. I know it’s an election year. I’m going to wait to see what happens and see what happens in November and then decide after that what to do with it. Do you see that? Historically speaking, does that make sense? And should you be sitting on cash waiting for an election result before letting that dictate your investment strategy?

13:51
Speaker 1
Absolutely not. This is crazy data. But, you know, fund flows, presidential election years, there’s. Money markets have reached all time highs. 114 with. That’s billion. We’ll have to edit this because I didn’t read it before you set me up there. Sorry. And only making your life tough. Oh, and billionaire says it right there. Okay. Yeah, Ben, this is crazy. So if you just look at presidential election years, people are scared. They’re sitting on the sidelines. So the last 20 years, like 1993, 2023.

14:25
Speaker 2
I’m sorry.

14:25
Speaker 1
The last 30 years, $114 billion in money markets. And then during non presidential election years, less than half of that, 56.

14:36
Speaker 2
And then stock people are holding double the amount of cash in a year than a normal year.

14:40
Speaker 1
Yeah. And then stocks and bonds, I mean, they’re. During the presidential, they’re less than non presidential extra years. And then the flows. So if you look at money markets, like, in the flows of the last presidential election year, in 2020, it was like an all time high, $685 billion. If you look what happened and, you know, the market did well in 2020 to 2024.

15:04
Speaker 2
Yeah.

15:05
Speaker 1
There was a dip. There was a pretty bad year there. But still, overall, it did. It did well. It was positive years.

15:09
Speaker 2
Why is that? We’ve spent all the last 1520 minutes going through the data showing facts that, hey, it doesn’t matter Democrat, Republican, who’s in office. The market has done well. If you stay invested and you stick to an investment strategy, why do you think there’s all this behavioral data that is showing? That’s not the case.

15:29
Speaker 1
They don’t have friends to call like you do, man. They’re not as, like. No, I’m just kidding. No, I think it’s just a lack of misinformation. And now with social media, it’s like everyone’s an expert. And there’s so much of the economy that drives off of negativity. Like, companies make billions of dollars if your health goes bad. Companies make billions of dollars if your attention goes to them. And studies have shown attention goes if there’s negativity, if there’s some, like, drama involved. And so there’s just so much more. There’s so much misinformation that’s spread, that’s so easily available on these screens. And I think, you know, our brains become what we think about. And so if you don’t have control what you think about, you’re not getting yourself, like, logical, good data. Someone’s else gonna, like, subconsciously start making decisions on your behalf?

16:22
Speaker 1
I think that’s just on a basic. It sounds crazy, but that is literally what happens and why people make bad investment decisions.

16:28
Speaker 2
Yeah, I think about, like, it’s simple, not easy. And I know that’s something that I think through a lot when it comes to financial planning, it’s simple to stay invested, and it’s simple to see the facts. And when the market goes down, understand that we got to stay in because of the long term. It’s going to make the most sense, but it’s not easy for all the reasons you just mentioned.

16:50
Speaker 1
All right, well, Ben, we need to take a quick commercial break and decide our picks for the BMW championship. This will be obviously released after Ben has a history of picking some pretty good picks. I have struck an out. So I’m just curious. Who do you think is going to win? We were down to a field of 50. Now just. Let’s just say, who do you think is going to make the top five? Two players make the top five.

17:16
Speaker 2
I’ll make those picks. First of all, I’m really excited for this course. Castle Pines in Denver. Some elevation changes forever. Ball’s going to be flying.

17:24
Speaker 1
I played bally, Neil, and it was crazy. I thought my driver, I was like, I’d figure it out. Nope, it was just the elevated tee.

17:29
Speaker 2
Boxes, like, 180 yard shots. Playing 140, like, very cool. Very. It’s going to be cool. Cool to watch. I will do one chalk pick and then one maybe out of the box pick. Chalk. I mean, you got to go. Scotty Scheffler, he’s just an absolute machine. He’s shown.

17:47
Speaker 1
He’s out of jail. I agree.

17:48
Speaker 2
He’s shown that literally every part of his game is above average to excellent. Now that he’s putting above average, he’s. He’s stroke scanned around the green stroke scanned approach. He’s a. An accurate driver. He really does everything well, and I think a course like this will fit him well for his ball striking. And I’ll go with, you know, off the. Off the beaten path. Aaron Rye, he’s been absolutely on fire this summer. Really. Just playing amazing golf. And see the guy that wears two gloves, iron covers, and it’s not raining.

18:23
Speaker 1
It’s not raining. Dude, what are you doing?

18:24
Speaker 2
Two gloves, iron covers. So he’s got, you know, maybe two strikes against him, but he’s. He’s playing really well.

18:30
Speaker 1
He has covers on his arc nicked, like.

18:34
Speaker 2
Like, little no judgment look.

18:37
Speaker 1
Like, hey, judgment.

18:38
Speaker 2
I think that was, like, his. He grew up doing that. But anyways, I’ll go Scotty and Aaron Rye will be my. My two top five picks.

18:46
Speaker 1
I’m gonna agree with you, Scotty. I’m gonna say Victor. He’s. He battles had off year, had obviously won it all last year, had maybe parted too much this summer. I don’t know. It’s changed a couple of things into strokes. Didn’t have the best regular season, but now you can see last week, he turned it on.

19:06
Speaker 2
Yeah, he’s just boomer bust. I mean, it feels like it kind of depends on the week with him, but he’s got the talent, for sure.

19:11
Speaker 1
Well, Ben, anything else to add? I know that was, like, a little commercial break, but we actually don’t have anything else to say other than just stay invested.

19:20
Speaker 2
Yeah. And I think just be wary of where your news is coming from and look at the data and try to get facts to support your view on things, because there’s a lot of black or white thinkers out there or news articles that are trying to get you to click and view something. But the fact of the matter is, regardless of if a Democrat or a Republican is in office, the market is going to perform very similarly. The returns have been mostly equal. So the only way to make sure you’re catching all those returns is staying invested and not letting emotions dictate your investment strategy.

19:59
Speaker 1
All right, so just to summarize, if people made it this far, so, one, stay in the market during election all the time, doesn’t matter what’s happening in the election. Two, if Mike Tomlin runs for president, vote for him. And three, if you’re feeling down, call a friend.

20:16
Speaker 2
That’s probably the best.

20:18
Speaker 1
Take anything away. That’s good advice. That actually is a good one. Thank you, Pat. Well, everybody, hope you enjoyed this episode. We’ll catch you next week. Thanks for tuning in to our podcast. Hopefully you found this helpful. Really hope this is as beneficial and impactful to as many people across the nation as possible. So hit the follow button, make sure to rate the podcast, and please share with any friends or family members that would also find this beneficial. Thank you very much.