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Financial Preparation for Presidential Elections

Financial Preparation for Presidential Elections


To the Clients of Resilient Asset Management: 

I hope this note finds you all well.  We are into the 5th or 6th month of the Pandemic, depending on what start date you use.  Ahhh our 2020...by nearly all objective standards, it has amounted to a most difficult year to this point for all of us. 

For me, optimism still reigns supreme.  I retain high hopes for further improvements in therapeutics to treat those infected with COVID as well as for an FDA-Approved Vaccine - the sooner the better.  New solutions to mitigate the pandemic impact will surface - just watch...check-out how professional sports are streamlining testing.  Humans will not permit the kinds of impositions we've endured to persist for long...WE have more ingenuity than any virus could ever have.  

As I have written to you before, I am no authority on the process behind vaccine or therapeutic development; however, I do know many brilliant people are addressing the problem at scale - and I will bet on this crew to triumph over a virus 100% of the time.  Indeed, better days lie ahead.  

A few words on some financial topics - an area about which I'm much more comfortable commenting. 

1) My Accessibility to you during the Pandemic


I recently read an article that was a bit disturbing.  Here is the reference for my following comments:  Article 

According to the article, Two-thirds (67%) of the Nation's Investors work with some sort of Financial Professional.  Inexplicably, One-Third (33%) of those working with a Financial Professional "said their professional was nowhere to be found during the pandemic".

Without going into a lengthy explanation, I will simply say I hope none of you feels this way.  Day or night, weekend or weekday, holiday or otherwise, if you are feeling financial angst of any sort or simply want to discuss your situation, you all know how to reach me.  

I can't promise perfection; however, I will never be one of the 33% of financial professionals who are not reachable.

2) Fees

 

I read another somewhat disturbing article describing how the Securities and Exchange Commission (SEC) has issued warnings to Financial Professionals about charging inaccurate or excessive fees during the pandemic.  The reference article is here.

Again, I will not go into a lot of detail.  Rather, I will reiterate what I told each of you prior to executing our Client Engagement Agreement.  Your fees are clearly spelled out for each billing cycle.  There should be no surprises when you receive your invoices.   

For those whose fees are drafted, please cross-check the amount invoiced with the amount deducted from your Investment Account(s).  For those paying via other means, please refer to your Client Engagement Agreement to ensure the invoice matches your agreement.  

Simply put, please let me know immediately if there is any confusion regarding fees. 

3) The Upcoming Presidential Election

 

As most are aware, we have a Presidential Election coming up in just under 3 months.  For starters, Resilient Asset Management is 100% apolitical.  To date, no potential Client has ever asked for my views on any political matters and I would not expect any would - I hold no expertise in that area.   

Necessarily, part of my work includes, among other things, adjusting to the changing landscape the current administration presents.  Typically, the ever-ongoing financial planning process results in recommendations based on enacted legislation and has nothing to do with a political viewpoint.  In fact, my personal views never enter into the equation. 

I have had a few conversations with Clients related to the 2020 election and how the outcome may impact one’s finances.  I thought I would point out a few facts related to the history of stock market performance, taking into account which party is in control of the White House and each chamber of the Congress.  First, a little history of my own: 

In 1992, I was a Youngster (2nd Year) Midshipman at the Naval Academy.  On the night of that year's election, November 3, 1992, I was "on-watch" (as in "NOT on my watch") in Annapolis when then President George H.W. Bush delivered his concession speech and watched then President-elect Clinton deliver his victory speech in my home town of Little Rock.  I never dreamed my Governor could ascend to the White House....neither did many others when his campaign started. 

At that time, I was barely 19 years-old and all I had known of Presidents to that point was 8 years of President Reagan followed by 4 years of President H.W. Bush. For those doing the math, prior to President Reagan, I was surviving as the youngest of 3 and had no interest in politics - Atari, Soccer, and Math dominated my waking hours...pretty much in that order.  

Clearly, President-elect Clinton was going to point the country in a different direction.  Even then, I had "some" investable assets - and I vividly recall thinking they were doomed.  Here is a scorecard of that supposition...more specifically, a tally of how the S&P 500 performed while President Clinton was in office:

S&P 500 on January 20, 1993 (Inauguration Day):  433.37

S&P 500 on January 19, 2001 (Last Day in Office):  1342.54

Annualized Return:  15.18%

Total Return:  209.7%

So much for my fears...to be fair, for those in the know, standing watch can lead to many somewhat interesting thoughts crossing one's mind - I digress.

I tell you this to add context to anyone holding on to notions such as "Democrats are bad for business" or "Republicans are good for stocks".  The reality is that the stock market has moved upward over the long-term not because of any political party or White House occupant.  Instead, dramatic stock market performance was the result of the miracle that is the United States Economy...never has our world known such a capitalist economic engine.  Indeed, through thick and thin, our economic wings have had the non-stop action of a hummingbird.  And no President or political party will unseat that greatness.  We have our Founders to thank for establishing this one-of-a-kind framework.  And to be fair, to their Successors for maintaining the environment for our country to achieve its greatness.

To add some more facts to the conversation, here are some interesting snippets related to the dominant political party and the performance of the stock market.  Of course, the standard disclaimer of past performance guaranteeing nothing about future results applies.  Nevertheless, here are some tidbits for you: 

(i) Since 1900, Democrats have actually been better for stocks, according to the Dow Jones Industrial Average...the Dow has returned about 9% when Democrats are in control compared to 6% during Republican administrations.

(ii) Divided Government.  The Conventional Wisdom is that a divided government, where the party in control of the White House and at least one chamber of Congress differ, is better for stocks.  The data since 1928 for the two years following Presidential Elections actually confirms the opposite, here is the tally:  

a) Same Party controls the White House and both chambers of Congress, stock market returns:  16.9%  

b) Congress controlled by the same party with the White House opposing, stock market returns:  15.6%

c) White House controlled by one party with one Chamber of Congress opposing, stock market returns:  5.5%

The source for the above statistics is here.

Of course, these are simply historical averages...as I have said previously, anything can happen with markets.

I detail the above historical facts not to dazzle you.  Rather, I want to allay concerns you may have about potential financial outcomes of the upcoming election.  Panicking or worrying to the point of becoming reactionary is generally not advised in any situation, financial or otherwise.  Rather, I encourage you to vote for the candidate you think is best.  And then, we will see how policies emerge - as we have seen before, promises on the campaign trail frequently morph into different looking legislation. 

Ultimately, as policies evolve, new financial planning strategies will present themselves.  Even so, it is important to realize that any prospective changes will be necessarily slow, thus providing ample time to formulate a cogent strategy where one is warranted.  Meanwhile, obsessing, as I did when watching President Clinton's victory speech, is not recommended. 

Enough about politics....

In closing, I wanted to thank each of you for continuing to trust me and my Firm to assist you with reaching your financial goals.  Without you, Resilient Asset Management would simply not exist.  I look forward to sending you many more of these letters.

As always, if any of you have concerns about your specific situation, please contact me directly and we can meet at your convenience.

Comments, criticism, and suggestions are always welcome.  If you would like to provide any, please contact me here.

 

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